Question 1

Consumers express self-interest when they:

Accepted Answer

A)  reduce business losses.
B)  collect economic profits.
C)  seek the lowest price for the product.
D)  search for jobs with the highest wageE) A) and B)
F) A) and C)

Question 2

Freedom of enterprise is defined as:

Accepted Answer

A)  the freedom of firms to obtain and use resources to produce goods and services.
B)  employ and dispose of their property as they see fit.
C)  buy property.
D)  set up any form of business.entity.E) A) and C)
F) A) and B)

Question 3

The idea that the desires of resource suppliers and producers 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)  profit maximization.E) A) and B)
F) A) and C)

Question 4

"The 'dollar votes' of consumers ultimately determine the composition of output and the allocation of resources in a market economy." This statement best describes the concept of:

Accepted Answer

A)  derived demand.
B)  external costs and benefits.
C)  consumer sovereignty.
D)  the invisible hand.E) C) and D)
F) None of the above

Question 5

Which is assumed to be most limited in scope under a market system?

Accepted Answer

A)  freedom of enterprise
B)  freedom of choice
C)  competition
D)  governmentE) A) and C)
F) B) and C)

Question 6

In market economies, profit primarily depends on consumer demand, production efficiency, and product quality.In contrast, in command economies, profit depends on:

Accepted Answer

A)  production cost.
B)  product quality.
C)  product mix.
D)  quantitative production targets.E) None of the above
F) All of the above

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Specialization in production is important primarily because it:

Accepted Answer

A)  results in greater total output.
B)  allows society to avoid the coincidence-of-wants problem.
C)  allows society to trade by barter.
D)  allows society to have fewer capital goods.E) A) and B)
F) C) and D)

Question 9

In the simple circular flow model businesses are suppliers of final products.

Accepted Answer

A) True 
 B)False

Question 10

The market system is characterized by:

Accepted Answer

A)  extensive government constraints on individual behaviour.
B)  private ownership of the means of production.
C)  government control of all production decisions.
D)  government rationing of all goods and services.E) B) and D)
F) All of the above

Question 11

The guiding function of prices indicates that, at equilibrium prices, neither product surpluses nor shortages can occur.

Accepted Answer

A) True 
 B)False

Question 12

The term dollar votes means:

Accepted Answer

A)  inflation will occur if consumers don't spend wisely.
B)  voters may be offered dollars to help elect certain political candidates.
C)  government is responsible for determining what will be considered legal tender.
D)  consumers "vote" for certain products to be produced by how they spend their incomes.E) A) and B)
F) None of the above

Question 13

Which condition will encourage competition?

Accepted Answer

A)  government licensing requirements in order to enter an industry
B)  a small number of buyers and sellers in a market
C)  the freedom of sellers and buyers to enter or exit an industry
D)  the government serving as the only supplier of goods to consumersE) All of the above
F) B) and D)

Question 14

The answer to "Who will get the output?" is based on:

Accepted Answer

A)  ability to pay.
B)  willingness to pay.
C)  the ability and willingness of consumers to pay for the output.
D)  a first-come, first-served basis.E) C) and D)
F) B) and C)

Question 15

Producing goods and services is:

Accepted Answer

A)  risky.
B)  risk free.
C)  always profitable.
D)  rarely profitable.E) None of the above
F) C) and D)

Question 16

Refer to the circular flow model of the economy.In the diagram flow (4)  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) C) and D)
F) B) and D)

Question 17

By free enterprise, we mean that:

Accepted Answer

A)  products are provided free to those who can't afford to buy them.
B)  individual producers determine how to produce, but government agencies determine what will be produced.
C)  individuals may obtain resources, organize production, and sell the resulting output in any legal way they choose.
D)  individuals are free to produce those products that government agencies determine can be produced profitably.E) None of the above
F) A) and D)

Question 18

Refer to the circular flow model of the economy.In the diagram flow (1)  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) All of the above
F) None of the above

Question 19

The division of labour enhances productivity and efficiency by:

Accepted Answer

A)  allowing workers to take advantage of existing differences in their abilities and skills.
B)  avoiding the time loss involved in shifting from one production task to another.
C)  allowing workers to develop skills by working on one, or a limited number, of tasks.
D)  all of the above means.E) C) and D)
F) B) and D)

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

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

Correct Answer
verified

Producing goods and services is:

Correct Answer
verified

Specialization in production is important primarily because it:

Correct Answer
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Which condition will encourage competition?

Correct Answer
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Freedom of enterprise is defined as:

Correct Answer
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The answer to "Who will get the output?" is based on:

Correct Answer
verified

Which is assumed to be most limited in scope under a market system?

Correct Answer
verified

By free enterprise, we mean that:

Correct Answer
verified

"The 'dollar votes' of consumers ultimately determine the composition of output and the allocation of resources in a market economy." This statement best describes the concept of:

Correct Answer
verified

The division of labour enhances productivity and efficiency by:

Correct Answer
verified

In market economies, profit primarily depends on consumer demand, production efficiency, and product quality.In contrast, in command economies, profit depends on:

Correct Answer
verified

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

Correct Answer
verified

The guiding function of prices indicates that, at equilibrium prices, neither product surpluses nor shortages can occur.

Correct Answer
verified

Refer to the circular flow model of the economy.In the diagram flow (4) represents:

Correct Answer
verified

The market system is characterized by:

Correct Answer
verified

Refer to the circular flow model of the economy.In the diagram flow (1) represents:

Correct Answer
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Consumers express self-interest when they:

Correct Answer
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The term dollar votes means:

Correct Answer
verified

In the simple circular flow model businesses are suppliers of final products.

Correct Answer
verified

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

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

Correct AnswerverifiedShow Answer

Producing goods and services is:

Correct AnswerverifiedShow Answer

Specialization in production is important primarily because it:

Correct AnswerverifiedShow Answer

Which condition will encourage competition?

Correct AnswerverifiedShow Answer

Freedom of enterprise is defined as:

Correct AnswerverifiedShow Answer

The answer to "Who will get the output?" is based on:

Correct AnswerverifiedShow Answer

Which is assumed to be most limited in scope under a market system?

Correct AnswerverifiedShow Answer

By free enterprise, we mean that:

Correct AnswerverifiedShow Answer

"The 'dollar votes' of consumers ultimately determine the composition of output and the allocation of resources in a market economy." This statement best describes the concept of:

Correct AnswerverifiedShow Answer

The division of labour enhances productivity and efficiency by:

Correct AnswerverifiedShow Answer

In market economies, profit primarily depends on consumer demand, production efficiency, and product quality.In contrast, in command economies, profit depends on:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The guiding function of prices indicates that, at equilibrium prices, neither product surpluses nor shortages can occur.

Correct AnswerverifiedShow Answer

Refer to the circular flow model of the economy.In the diagram flow (4) represents:

Correct AnswerverifiedShow Answer

The market system is characterized by:

Correct AnswerverifiedShow Answer

Refer to the circular flow model of the economy.In the diagram flow (1) represents:

Correct AnswerverifiedShow Answer

Consumers express self-interest when they:

Correct AnswerverifiedShow Answer

The term dollar votes means:

Correct AnswerverifiedShow Answer

In the simple circular flow model businesses are suppliers of final products.

Correct AnswerverifiedShow Answer

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