Question 1

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.

Question 2

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the

Accepted Answer

A)  coordination problem under communist central planning.
B)  self-sufficiency dilemma under communism.
C)  asymmetric information problem under communism.
D)  incentive problem under communist central planning.

Question 3

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

Accepted Answer

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

Question 4

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 provided table. If the price of labor declines from $3 to $2 per unit, then what is the least costly way of producing Zenias?

Accepted Answer

A)  A
B)  B
C)  C
D)  D

Question 5

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 6

In a command economy, the head of each household makes the fundamental economic choices such as what to produce and how to produce output.

Accepted Answer

A) True 
 B)False

Question 7

Specialization is beneficial

Accepted Answer

A)  at the individual firm level, but not at the national and international levels.
B)  at the individual, regional, and even international levels.
C)  only if there are differences in the abilities of resources.
D)  only as long as money and capital goods are employed.

Question 8

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

Question 9

The production technique that is most efficient is the one that produces a given amount of output

Accepted Answer

A)  using the least amount of labor resources.
B)  at the highest price per unit.
C)  at the lowest cost per unit.
D)  that yields the highest revenues.

Question 10

Which of the following statements about markets and prices is correct?

Accepted Answer

A)  In a market system, buyers and sellers must be in face-to-face contact with each other.
B)  Prices affect the distribution of goods in a market system, but not the allocation of resources.
C)  In a market system, prices serve to ration goods and services to consumers.
D)  The operation of a market system has little, if any, effect on the distribution of income in the economy.

Question 11

The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

Accepted Answer

A)  the quantity or volume of production.
B)  product quality and variety.
C)  the amount of profits a producer makes.
D)  morale of workers in a firm.

Question 12

Barter

Accepted Answer

A)  is the major means of exchange in centrally planned economies.
B)  accounts for over 30 percent of the dollar volume of all exchange in the U.S. economy.
C)  entails the exchange of goods for goods.
D)  is used to circumvent the problem of a lack of coincidence of wants among potential buyers and sellers.

Question 13

Describe the three major virtues of a market system.

Accepted Answer

The three major virtues of the market sy...

Question 14

Economic efficiency is the primary guide in answering which of the fundamental questions in a market economy?

Accepted Answer

A)  What will be produced?
B)  How will the output be produced?
C)  How can the system accommodate change?
D)  Who is to receive the output?

Question 15

Answer the question based on the following information: Suppose 10 units of product X can be produced by employing just labor and capital in the three ways shown below. Assume the prices of labor and capital are as shown.  Which technique is the most economically efficient?

Accepted Answer

A)  Technique I with total costs of $18
B)  Technique I with total costs of $17
C)  Technique III with total costs of $13
D)  Technique II with total costs of $15

Question 16

Answer the question based on 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 $4 and $3, respectively.  Which technique is economically most efficient in producing A?

Accepted Answer

A)  III
B)  II
C)  I
D)  IV

Question 17

In a capitalist system, the decisions and actions of millions of consumers and firms are highly coordinated by

Accepted Answer

A)  the state governments.
B)  markets and prices.
C)  a central planning agency.
D)  an international organization.

Question 18

"For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this question is resolved primarily in the

Accepted Answer

A)  public sector through the mechanism of central planning.
B)  business sector through the mechanism of advertising.
C)  private sector through the earning and spending of income.
D)  money market through borrowing and saving by households and businesses.

Question 19

Without government subsidized property insurance, people are more likely to be cognizant of the risks of building and living in fire-prone or flood-prone areas because their insurance costs will be higher.

Accepted Answer

A) True 
 B)False

Question 20

"Consumer sovereignty" refers to the

Accepted Answer

A)  fact that resource prices are higher than product prices in capitalistic economies.
B)  idea that the pursuit of self-interest is in the public interest.
C)  idea that the decisions of producers must ultimately conform to consumer demands.
D)  fact that a federal agency exists to protect consumers from harmful and defective products.

Exam 2: The Market System and the Circular Flow

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the

Correct Answer
verified

"Consumer sovereignty" refers to the

Correct Answer
verified

Economic efficiency is the primary guide in answering which of the fundamental questions in a market economy?

Correct Answer
verified

Without government subsidized property insurance, people are more likely to be cognizant of the risks of building and living in fire-prone or flood-prone areas because their insurance costs will be higher.

Correct Answer
verified

In a command economy, the head of each household makes the fundamental economic choices such as what to produce and how to produce output.

Correct Answer
verified

Describe the three major virtues of a market system.

Correct Answer
verified
The three major virtues of the market sy...
View Answer

The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

Correct Answer
verified

Answer the question based on 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 $4 and $3, respectively. Which technique is economically most efficient in producing A?

Correct Answer
verified

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

Specialization is beneficial

Correct Answer
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Correct Answer
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Barter

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements about markets and prices is correct?

Correct Answer
verified

In a capitalist system, the decisions and actions of millions of consumers and firms are highly coordinated by

Correct Answer
verified

Specialization in production is important primarily because it

Correct Answer
verified

"For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this question is resolved primarily in the

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

Answer the question based on the following information: Suppose 10 units of product X can be produced by employing just labor and capital in the three ways shown below. Assume the prices of labor and capital are as shown. Which technique is the most economically efficient?

Correct Answer
verified

The production technique that is most efficient is the one that produces a given amount of output

Correct Answer
verified

Exam 2: The Market System and the Circular Flow

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the

Correct AnswerverifiedShow Answer

"Consumer sovereignty" refers to the

Correct AnswerverifiedShow Answer

Economic efficiency is the primary guide in answering which of the fundamental questions in a market economy?

Correct AnswerverifiedShow Answer

Without government subsidized property insurance, people are more likely to be cognizant of the risks of building and living in fire-prone or flood-prone areas because their insurance costs will be higher.

Correct AnswerverifiedShow Answer

In a command economy, the head of each household makes the fundamental economic choices such as what to produce and how to produce output.

Correct AnswerverifiedShow Answer

Describe the three major virtues of a market system.

Correct AnswerverifiedThe three major virtues of the market sy...View AnswerShow Answer

The major "success indicator" for business managers in command economies like the Soviet Union and China in the past was

Correct AnswerverifiedShow Answer

Answer the question based on 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 $4 and $3, respectively. Which technique is economically most efficient in producing A?

Correct AnswerverifiedShow Answer

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

Specialization is beneficial

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Correct AnswerverifiedShow Answer

Barter

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

Correct AnswerverifiedShow Answer

Which of the following statements about markets and prices is correct?

Correct AnswerverifiedShow Answer

In a capitalist system, the decisions and actions of millions of consumers and firms are highly coordinated by

Correct AnswerverifiedShow Answer

Specialization in production is important primarily because it

Correct AnswerverifiedShow Answer

"For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this question is resolved primarily in the

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

Answer the question based on the following information: Suppose 10 units of product X can be produced by employing just labor and capital in the three ways shown below. Assume the prices of labor and capital are as shown. Which technique is the most economically efficient?

Correct AnswerverifiedShow Answer

The production technique that is most efficient is the one that produces a given amount of output

Correct AnswerverifiedShow Answer

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The three major virtues of the market sy...
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