Question 1

The market system communicates changes in supply and demand and elicits appropriate responses from businesses and resource suppliers.This is known as the:

Accepted Answer

A)  rationing function of prices.
B)  guiding function of prices.
C)  monetary function of prices.
D)  circular flow of income.E) A) and B)
F) A) and C)

Question 2

Which of the following is not a part of a market system?

Accepted Answer

A)  private property
B)  freedom of enterprise and choice
C)  competition in product and resource markets
D)  government determination of basic economic goalsE) A) and D)
F) A) and B)

Question 3

The most important consequence of property rights is that

Accepted Answer

A)  they facilitate exchange.
B)  allow for freedom of choice.
C)  they encourage people to cooperate by helping to ensure that only mutually agreeable economic transactions take place.
D)  they allow for a division of labour.E) B) and C)
F) A) and D)

Question 4

The two basic markets shown by the simple circular flow model are:

Accepted Answer

A)  capital goods and consumer goods.
B)  free and controlled.
C)  product and factor.
D)  household and business.E) C) and D)
F) B) and D)

Question 5

On the basis of the information provided and assuming trade occurs between the three provinces we can expect:

Accepted Answer

A)  Alberta to exchange apples with Ontario and receive money in return.
B)  Alberta to exchange apples with British Columbia and receive money in return.
C)  Ontario to exchange lettuce with British Columbia and receive autos in return.
D)  none of the above to occur.E) B) and C)
F) A) and D)

Question 6

Refer to the circular flow model of the economy.In the diagram flow (2)  represents:

Accepted Answer

A)  wage, rent, interest, and profit income.
B)  land, labour, capital, and entrepreneurial ability.
C)  goods and services.
D)  consumer expenditures.E) B) and C)
F) None of the above

Question 7

The process in which workers select specialized tasks to make a product is referred to as:

Accepted Answer

A)  a coincidence of wants.
B)  roundabout production.
C)  freedom of choice.
D)  division of labour.E) None of the above
F) All of the above

Question 8

Households and businesses are both suppliers in the product market.

Accepted Answer

A) True 
 B)False

Question 9

Specialization in production is economically beneficial primarily because it:

Accepted Answer

A)  allows everyone to have a job which they like.
B)  permits the production of a larger output with fixed amounts of resources.
C)  facilitates trade by bartering.
D)  guarantees full employment.E) A) and B)
F) All of the above

Question 10

Freedom of choice enables:

Accepted Answer

A)  entrepreneurs to procure and use resources that are required to produce goods and services at their own will.
B)  owners of property to employ and dispose of their properties as they see fit.
C)  consumers to maximize their utility by paying the minimum price for goods and services.
D)  entrepreneurs to set up any form of business entity as per law.E) C) and D)
F) B) and D)

Question 11

The wants of consumers are expressed on the demand side of the product market.

Accepted Answer

A) True 
 B)False

Question 12

The term "mixed economy" refers to an economy:

Accepted Answer

A)  comprised of both product and resource markets.
B)  which engages in both domestic and international trade.
C)  comprised of both extensive private markets and government involvement in the economy.
D)  which functions primarily on the basis of custom and tradition.E) B) and C)
F) All of the above

Question 13

_____ helps avoid the problems posed by the lack of double coincidence of wants.

Accepted Answer

A)  Barter
B)  Trade
C)  Money
D)  Freedom of choiceE) C) and D)
F) B) and D)

Question 14

The most efficient combination of resources in producing any output is that combination which:

Accepted Answer

A)  comes closest to using the same quantities of land, labour, capital, and entrepreneurial ability.
B)  can be obtained for the smallest money outlay.
C)  uses the smallest total quantity of all resources.
D)  conserves most on the use of labour.E) A) and D)
F) All of the above

Question 15

The "invisible hand" refers to the many indirect controls which the federal government imposes in a system of mixed capitalism.

Accepted Answer

A) True 
 B)False

Question 16

Property rights are important because they:

Accepted Answer

A)  encourage investment and growth.
B)  are conducive to the writing of books and music.
C)  facilitate exchange.
D)  do all of the above.E) B) and C)
F) C) and D)

Question 17

Refer to the figure.If box A represents businesses and flow (7)  represents goods and services, then:

Accepted Answer

A)  box D is the product market and box B is the factor market.
B)  box D is the product market and box B is households.
C)  box B is the product market and box C is households.
D)  box C is the product market and box B is the factor market.E) A) and B)
F) A) and C)

Question 18

The development of the Internet and e-mail to replace regular mail services in many cases would be an example of:

Accepted Answer

A)  roundabout production.
B)  derived demand.
C)  creative destruction.
D)  specialization.E) C) and D)
F) A) and D)

Question 19

What to produce in a market economy is ultimately determined by the:

Accepted Answer

A)  output decisions of business firms.
B)  government.
C)  spending decisions of households.
D)  workers' technical skills.E) B) and C)
F) All of the above

Question 20

Which would not be characteristic of a capitalist economy?

Accepted Answer

A)  government ownership of the means of production
B)  competition and unrestricted markets
C)  reliance on the market system
D)  free enterprise and choiceE) All of the above
F) C) and D)

Exam 2: B: The Market System and the Circular Flow

Property rights are important because they:

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The development of the Internet and e-mail to replace regular mail services in many cases would be an example of:

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The wants of consumers are expressed on the demand side of the product market.

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The process in which workers select specialized tasks to make a product is referred to as:

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Refer to the circular flow model of the economy.In the diagram flow (2) represents:

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The most efficient combination of resources in producing any output is that combination which:

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Specialization in production is economically beneficial primarily because it:

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_____ helps avoid the problems posed by the lack of double coincidence of wants.

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What to produce in a market economy is ultimately determined by the:

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The term "mixed economy" refers to an economy:

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Households and businesses are both suppliers in the product market.

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Which would not be characteristic of a capitalist economy?

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Freedom of choice enables:

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On the basis of the information provided and assuming trade occurs between the three provinces we can expect:

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The "invisible hand" refers to the many indirect controls which the federal government imposes in a system of mixed capitalism.

Correct AnswerverifiedShow Answer

The market system communicates changes in supply and demand and elicits appropriate responses from businesses and resource suppliers.This is known as the:

Correct AnswerverifiedShow Answer

The most important consequence of property rights is that

Correct AnswerverifiedShow Answer

The two basic markets shown by the simple circular flow model are:

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Refer to the figure.If box A represents businesses and flow (7) represents goods and services, then:

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Which of the following is not a part of a market system?

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