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Exam 2: The Market System and the Circular Flow

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Question 61

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Private property:

A) discourages cooperation because people don't want to part with what they own.
B) discourages innovation,as people are often afraid to risk losing their own property.
C) encourages owners to maintain or improve their property so as to preserve or enhance value.
D) does everything indicated by the other answers.

E) A) and D)
F) A) and B)

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Question 62

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The invisible hand promotes society's interests because:

A) individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase.
B) individuals will produce goods for others out of concern for their fellow human beings.
C) it makes sure that everyone wins from competition in the market.
D) government regulation pushes business into producing the right mix of goods and services.

E) A) and B)
F) B) and C)

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Question 63

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(Consider This) In 2000,McDonald's introduced its McSalad Shaker,which failed to catch on with the public and was subsequently dropped from the menu.This failure illustrates the idea of:

Costs can be defined as total payments made to workers,land owners,and capital suppliers less payments to the entrepreneur for organizing and combining the other resources used to produce a good.

If competitive industry Z is making substantial economic profit,output will:

Economic profits and losses:

The coordination problem in the centrally planned economies refers to the idea that:

Answer the question using the following data,which show all available techniques for producing 20 units of a particular commodity: $\begin{array}{c}\quad\quad\quad\quad\quad\quad\quad\text {Resource}\quad\quad\quad\quad\quad\text { Possible Production Techniques }\\\begin{array}{lll}\\\underline{\text {Resource}}\\ \text {Land}\\ \text {Labor}\\ \text {Capital}\\ \text {Entrepreneurial Ability}\end{array}\begin{array}{c}\\\underline{\text {Prices}}\\\$ 4\\3\\3\\2\end{array}\begin{array}{c}\\\quad\quad\quad\quad\quad\quad\quad\quad\quad\underline{\# 1} \\ \quad\quad\quad\quad\quad\quad\quad\quad\quad2 \\\quad\quad\quad\quad\quad\quad\quad\quad\quad1 \\\quad\quad\quad\quad\quad\quad\quad\quad\quad5 \\\quad\quad\quad\quad\quad\quad\quad\quad\quad3\end{array}\begin{array}{c}\\\underline{\# 2 }\\ 4 \\2 \\2 \\1\end{array}\begin{array}{c}\\\underline{\#3 }\\ 2 \\4 \\3 \\1\end{array}\begin{array}{c}\\\underline{\# 4 }\\ 4 \\1 \\1 \\4\end{array}\begin{array}{c}\\\underline{\# 5 }\\ 4 \\3 \\2 \\1\end{array}\end{array}$ Refer to the data.Assuming that the firm is motivated by self-interest and that the 20 units that can be produced with each technique can be sold for $2 per unit,the firm will:

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit.