Question 1

Economic efficiency entails producing a certain output with the minimum number of units of inputs.

Accepted Answer

A) True 
 B)False

Question 2

In the circular flow model of the market system, business firms' major role is to

Accepted Answer

A)   buy products and resources.
B)   sell products and resources.
C)   buy products and sell resources.
D)   sell products and buy resources.E) A) and C)
F) None of the above

Question 3

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.  Using technique A will result in an

Accepted Answer

A)   economic loss of $2.
B)   economic profit of $1.
C)   economic profit of $2.
D)   economic profit of $3.E) A) and B)
F) A) and C)

Question 4

Competition is more likely to exist when

Accepted Answer

A)   there is easy entry into and exit out of industries.
B)   a government-issued license is required to set up a firm in an industry.
C)   the government purchases most goods and services.
D)   economic power is concentrated among a few large firms.E) C) and D)
F) All of the above

Question 5

The market system

Accepted Answer

A)   produces considerable inefficiency in the use of scarce resources.
B)   effectively harnesses the incentives of workers and entrepreneurs.
C)   is not consistent with freedom of choice in the long run.
D)   has slowly lost ground to emerging command systems.E) C) and D)
F) B) and C)

Question 6

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity  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

Accepted Answer

A)   realize an economic profit of $10.
B)   realize an economic profit of $4.
C)   not earn any economic profit.
D)   shut down rather than incur a loss by producing.E) C) and D)
F) A) and B)

Question 7

Which of the following does not foster innovation and technological advance?

Accepted Answer

A)   competition in markets
B)   freedom of choice and enterprise
C)   self-interest and personal rewards
D)   fear and avoidance of riskE) A) and B)
F) C) and D)

Question 8

In a competitive market economy, firms and resource suppliers seeking to further their own self-interest will end up, as though guided by an invisible hand, promoting the public interest.

Accepted Answer

A) True 
 B)False

Question 9

Freedom of enterprise

Accepted Answer

A)   is a characteristic that is common to most economic systems.
B)   in a market system means that entrepreneurs can obtain and use economic resources without any legal restraint.
C)   allows businesses, within broad limits, to choose what goods to produce.
D)   refers primarily to the right of consumers to purchase what they want.E) A) and D)
F) A) and C)

Question 10

According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then

Accepted Answer

A)   government should regulate the business to ensure quality.
B)   the profit Susie earns indicates that she is overcharging for her services.
C)   she has served society's interests by providing a desired good or service.
D)   this demonstrates that consumer sovereignty is not present in this market.E) All of the above
F) B) and D)

Question 11

Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively.  Which technique is economically most efficient in producing A?

Accepted Answer

A)   I
B)   II
C)   III
D)   IVE) None of the above
F) All of the above

Question 12

The competitive market system

Accepted Answer

A)   encourages innovation because government provides tax breaks and subsidies to those who develop new products or new productive techniques.
B)   discourages innovation because it is difficult to acquire additional capital in the form of new machinery and equipment.
C)   discourages innovation because firms want to get all the profits possible from existing machinery and equipment.
D)   encourages innovation because successful innovators are rewarded with economic profits.E) A) and B)
F) A) and C)

Question 13

Which of the following is not one of the five fundamental questions?

Accepted Answer

A)   What prices will be charged for goods and services?
B)   Who will get the goods and services?
C)   What goods and services will be produced?
D)   How will the system promote progress?E) All of the above
F) A) and C)

Question 14

In a market system, the task of assessing and managing the business risk of a firm is taken on by the firm's

Accepted Answer

A)   labor.
B)   capital suppliers.
C)   entrepreneurs.
D)   customers.E) B) and C)
F) A) and C)

Question 15

Which of the following best illustrates the circular flow model in action?

Accepted Answer

A)   Bobbie goes to work and builds cars; she uses the income she receives to buy food at the grocery store.
B)   Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier and uses the rest to take her family out to dinner.
C)   Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers.
D)   All of these answers illustrate the workings of the circular flow model.E) A) and B)
F) A) and C)

Question 16

According to the circular flow model of the market system, when resource-owners' money income is rising, then the costs to business firms that employ their resources must be falling.

Accepted Answer

A) True 
 B)False

Question 17

The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?

Accepted Answer

A)   laissez-faire economy
B)   pure capitalism
C)   mixed-market economy
D)   macroeconomic systemE) B) and D)
F) B) and C)

Question 18

The concept of consumer sovereignty refers to the situation where consumers have the right to vote for the board of directors of large corporations.

Accepted Answer

A) True 
 B)False

Question 19

The simple circular flow model shows that

Accepted Answer

A)   households are on the buying side of both product and resource markets.
B)   businesses are on the selling side of both product and resource markets.
C)   households are on the selling side of the resource market and on the buying side of the product market.
D)   businesses are on the buying side of the product market and on the selling side of the resource market.E) C) and D)
F) A) and C)

Question 20

Households and businesses are

Accepted Answer

A)   both buyers in the resource market.
B)   both sellers in the product market.
C)   sellers in the resource and product markets respectively.
D)   sellers in the product and resource markets respectively.E) All of the above
F) C) and D)

Exam 2: The Market System and the Circular Flow

The concept of consumer sovereignty refers to the situation where consumers have the right to vote for the board of directors of large corporations.

Correct Answer
verified

The simple circular flow model shows that

Correct Answer
verified

Households and businesses are

Correct Answer
verified

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity 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

Correct Answer
verified

Economic efficiency entails producing a certain output with the minimum number of units of inputs.

Correct Answer
verified

Correct Answer
verified

In the circular flow model of the market system, business firms' major role is to

Correct Answer
verified

In a market system, the task of assessing and managing the business risk of a firm is taken on by the firm's

Correct Answer
verified

According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then

Correct Answer
verified

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. Using technique A will result in an

Correct Answer
verified

The competitive market system

Correct Answer
verified

In a competitive market economy, firms and resource suppliers seeking to further their own self-interest will end up, as though guided by an invisible hand, promoting the public interest.

Correct Answer
verified

The market system

Correct Answer
verified

According to the circular flow model of the market system, when resource-owners' money income is rising, then the costs to business firms that employ their resources must be falling.

Correct Answer
verified

Freedom of enterprise

Correct Answer
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The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?

Correct Answer
verified

Which of the following best illustrates the circular flow model in action?

Correct Answer
verified

Competition is more likely to exist when

Correct Answer
verified

Which of the following does not foster innovation and technological advance?

Correct Answer
verified

Which of the following is not one of the five fundamental questions?

Correct Answer
verified

Exam 2: The Market System and the Circular Flow

The concept of consumer sovereignty refers to the situation where consumers have the right to vote for the board of directors of large corporations.

Correct AnswerverifiedShow Answer

The simple circular flow model shows that

Correct AnswerverifiedShow Answer

Households and businesses are

Correct AnswerverifiedShow Answer

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity 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

Correct AnswerverifiedShow Answer

Economic efficiency entails producing a certain output with the minimum number of units of inputs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the circular flow model of the market system, business firms' major role is to

Correct AnswerverifiedShow Answer

In a market system, the task of assessing and managing the business risk of a firm is taken on by the firm's

Correct AnswerverifiedShow Answer

According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then

Correct AnswerverifiedShow Answer

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. Using technique A will result in an

Correct AnswerverifiedShow Answer

The competitive market system

Correct AnswerverifiedShow Answer

In a competitive market economy, firms and resource suppliers seeking to further their own self-interest will end up, as though guided by an invisible hand, promoting the public interest.

Correct AnswerverifiedShow Answer

The market system

Correct AnswerverifiedShow Answer

According to the circular flow model of the market system, when resource-owners' money income is rising, then the costs to business firms that employ their resources must be falling.

Correct AnswerverifiedShow Answer

Freedom of enterprise

Correct AnswerverifiedShow Answer

The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?

Correct AnswerverifiedShow Answer

Which of the following best illustrates the circular flow model in action?

Correct AnswerverifiedShow Answer

Competition is more likely to exist when

Correct AnswerverifiedShow Answer

Which of the following does not foster innovation and technological advance?

Correct AnswerverifiedShow Answer

Which of the following is not one of the five fundamental questions?

Correct AnswerverifiedShow Answer

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