Question 1

If a nation restricts trade with other nations, then the most likely effect is:

Accepted Answer

A)   Lower prices of goods and services in the nation
B)   Increased specialization of production
C)   Expanded economic wealth of the nation
D)   Make consumers in the nation worse offE) A) and B)
F) B) and C)

Question 2

An increase in the demand for a product and a reduction in its costs of production would:

Accepted Answer

A)   Decrease the profits of producers
B)   Encourage firms to leave an industry
C)   Encourage firms to enter an industry
D)   Cause a shortage of the productE) All of the above
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.  Based on the data given in the table above, the most economically efficient production technique is:

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) None of the above
F) A) and D)

Question 4

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)   CustomersE) B) and C)
F) A) and D)

Question 5

The development of the digital video and camera which replaced film cameras is an example of:

Accepted Answer

A)   Roundabout production
B)   Derived demand
C)   Creative destruction
D)   SpecializationE) A) and B)
F) A) and D)

Question 6

Laissez-faire capitalism limits the government's economic functions to the following, except:

Accepted Answer

A)   Protecting private property rights
B)   Establishing a legal environment to enforce contracts among individuals
C)   Preventing individuals and firms from coercing others
D)   Setting prices of individual goods and servicesE) A) and B)
F) A) and C)

Question 7

Which is true of an economy which operates entirely through central planning?

Accepted Answer

A)   Individual economic incentive is reduced by the absence of the profit motive
B)   There is relative ease in matching resource allocation to consumer demand
C)   Central planners receive market information through the price mechanism
D)   The system adapts easily to technological changeE) C) and D)
F) A) and C)

Question 8

Consumers express self-interest when they:

Accepted Answer

A)   Seek the lowest price for a product
B)   Reduce business losses
C)   Collect economic profits
D)   Exclude others in their thinkingE) A) and D)
F) A) and C)

Question 9

In the circular flow diagram, firms get their ability to pay for the costs of production from the:

Accepted Answer

A)   Revenues they receive for their products
B)   Resources they acquire in the resource markets
C)   Incomes they earn for their resources
D)   Goods and services they get in the product marketsE) A) and B)
F) B) and D)

Question 10

With specialization in a market economy, individual:

Accepted Answer

A)   Firms produce a wide range of products
B)   Producers consume little or none of the products they produce
C)   Producers consume most of the output that they produce
D)   Consumers have to produce most of what they consumeE) A) and C)
F) A) and B)

Question 11

Government bailouts of failing businesses, like banks during the recent economic crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions is dealing with business risk.

Accepted Answer

A) True 
 B)False

Question 12

The fundamental economic question regarding the distribution of output in the economy is equivalent to the question of who will produce the output.

Accepted Answer

A) True 
 B)False

Question 13

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as:

Accepted Answer

A)   Consumer sovereignty
B)   The invisible hand
C)   Derived demand
D)   Creative destructionE) B) and D)
F) All of the above

Question 14

In a market system, entrepreneurs start up businesses in order to earn a high salary.

Accepted Answer

A) True 
 B)False

Question 15

If economic profits in a particular industry increase, then we would expect:

Accepted Answer

A)   Resources to be diverted away from that industry
B)   Firms in that industry to produce less output
C)   Firms to enter that industry thus expanding it
D)   Consumers to buy less from that industryE) A) and B)
F) A) and C)

Question 16

Suppose a firm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit.  Refer to the above table, and suppose that the firm uses production technique D If each of the 70 units of Zenia that are produced sells for $1 apiece, then how much will be the profits of the firm from 70 units?

Accepted Answer

A)   $70
B)   $57
C)   $13
D)   $83E) A) and D)
F) A) and C)

Question 17

A characteristic of centrally planned economies is that:

Accepted Answer

A)   The price is relatively unimportant in allocating resources
B)   Output reflects the pattern of consumer spending
C)   Entrepreneurship is quite prevalent and highly rewarded
D)   There are many incentives for innovation and hard workE) A) and B)
F) B) and C)

Question 18

The market system is said to be characterized by "consumer sovereignty." This is because:

Accepted Answer

A)   A sovereign government determines which consumer goods will be produced
B)   The prices of consumer goods are regulated by a sovereign government
C)   Firms must match their production decisions to the consumers' choices
D)   Consumer goods are considered to be more important than capital goodsE) All of the above
F) A) and B)

Question 19

Which of the following would be primarily determined in the resource markets?

Accepted Answer

A)   The airfares charged by airlines for family vacations
B)   The wage rates for computer programmers and engineers
C)   The number of home-internet connections installed
D)   The amount of money in circulation issued by the governmentE) A) and B)
F) A) and C)

Question 20

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.  Refer to the above table. At the $3 price for labor the most efficient technique will result in an:

Accepted Answer

A)   Economic loss of $2
B)   Economic profit of $l
C)   Economic profit of $2
D)   Economic profit of $3E) All of the above
F) B) and D)

Exam 2: The Market System and the Circular Flow

In the circular flow diagram, firms get their ability to pay for the costs of production from the:

Correct Answer
verified

If a nation restricts trade with other nations, then the most likely effect is:

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. Refer to the above table. At the $3 price for labor the most efficient technique will result in an:

Correct Answer
verified

Consumers express self-interest when they:

Correct Answer
verified

An increase in the demand for a product and a reduction in its costs of production would:

Correct Answer
verified

With specialization in a market economy, individual:

Correct Answer
verified

Which of the following would be primarily determined in the resource markets?

Correct Answer
verified

Which is true of an economy which operates entirely through central planning?

Correct Answer
verified

The development of the digital video and camera which replaced film cameras is an example of:

Correct Answer
verified

Correct Answer
verified

Government bailouts of failing businesses, like banks during the recent economic crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions is dealing with business risk.

Correct Answer
verified

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as:

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

The fundamental economic question regarding the distribution of output in the economy is equivalent to the question of who will produce the output.

Correct Answer
verified

A characteristic of centrally planned economies is that:

Correct Answer
verified

If economic profits in a particular industry increase, then we would expect:

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. Based on the data given in the table above, the most economically efficient production technique is:

Correct Answer
verified

Laissez-faire capitalism limits the government's economic functions to the following, except:

Correct Answer
verified

In a market system, entrepreneurs start up businesses in order to earn a high salary.

Correct Answer
verified

The market system is said to be characterized by "consumer sovereignty." This is because:

Correct Answer
verified

Exam 2: The Market System and the Circular Flow

In the circular flow diagram, firms get their ability to pay for the costs of production from the:

Correct AnswerverifiedShow Answer

If a nation restricts trade with other nations, then the most likely effect is:

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. Refer to the above table. At the $3 price for labor the most efficient technique will result in an:

Correct AnswerverifiedShow Answer

Consumers express self-interest when they:

Correct AnswerverifiedShow Answer

An increase in the demand for a product and a reduction in its costs of production would:

Correct AnswerverifiedShow Answer

With specialization in a market economy, individual:

Correct AnswerverifiedShow Answer

Which of the following would be primarily determined in the resource markets?

Correct AnswerverifiedShow Answer

Which is true of an economy which operates entirely through central planning?

Correct AnswerverifiedShow Answer

The development of the digital video and camera which replaced film cameras is an example of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Government bailouts of failing businesses, like banks during the recent economic crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions is dealing with business risk.

Correct AnswerverifiedShow Answer

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as:

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

The fundamental economic question regarding the distribution of output in the economy is equivalent to the question of who will produce the output.

Correct AnswerverifiedShow Answer

A characteristic of centrally planned economies is that:

Correct AnswerverifiedShow Answer

If economic profits in a particular industry increase, then we would expect:

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. Based on the data given in the table above, the most economically efficient production technique is:

Correct AnswerverifiedShow Answer

Laissez-faire capitalism limits the government's economic functions to the following, except:

Correct AnswerverifiedShow Answer

In a market system, entrepreneurs start up businesses in order to earn a high salary.

Correct AnswerverifiedShow Answer

The market system is said to be characterized by "consumer sovereignty." This is because:

Correct AnswerverifiedShow Answer

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