Question 1

Which of the following transactions would occur in a product market?

Accepted Answer

A)   Getting a job at the local ice cream shop.
B)   Paying tuition at a local college so that you can take an art course that you'd really enjoy.
C)   Contracting with someone to develop a website for a business you run out of your home.
D)   Selling a machine you designed to a manufacturer so that it can lower its costs of production.

Question 2

Markets are important in economies where decisions are made:

Accepted Answer

A)   collectively.
B)   by planners.
C)   by individuals.
D)   by the government.

Question 3

In your opinion, do firms in a market economy respond to consumer preferences, or create consumer preferences? Why?

Accepted Answer

Both. Firms respond to preferences by mo...

Question 4

Which of the following statements is FALSE?

Accepted Answer

A)   In a market economy, goods and services are produced using least-cost production techniques.
B)   In a market economy, the basic economic questions are answered through the interaction of buyers and sellers.
C)   In a planned economy, how goods and services are produced is determined largely by the resources made available to producers.
D)   In most economies, the basic economic decisions are made either entirely by private individuals, or entirely by centralized authorities.

Question 5

Briefly explain each of the three basic economic decisions every society must make.

Accepted Answer

Every society must make a deci...

Question 6

Why is it in the best interest of a business in a market economy to use the least-cost method of production?

Accepted Answer

A firm's profits are the diffe...

Question 7

Circular flow model.
 
-If line 3 represents the flow of income to resource owners, then line 1 represents the flow of:

Accepted Answer

A)   resources in input markets.
B)   goods and services in output markets.
C)   payments by households for goods and services.
D)   none of the above.

Question 8

An example of government intervention in output markets would be:

Accepted Answer

A)   antidiscrimination laws.
B)   consumer protection laws.
C)   corporate income taxation.
D)   none of the above.

Question 9

What type of economic system best describes the U.S. economy in the 21st century? Why?

Accepted Answer

The US has primarily a mixed economy: th...

Question 10

The _______ Industrial Revolution had a profound effect on the country of the _______ _______.

Accepted Answer

British; U...

Question 11

Mercantilism:

Accepted Answer

A)   placed the interests of the state or government above the interests of private individuals.
B)   is the term used to describe the intense industrialization and rapid technology changes of the 1700s and 1800s.
C)   held that individual decision making with minimal government intervention would maximize the interests of the state.
D)   none of the above.

Question 12

A country that allows no market activity in making the basic economic choices has a:

Accepted Answer

A)   mixed economy.
B)   capitalistic economy.
C)   free enterprise economy.
D)   purely planned economy.

Question 13

Which of the following is not a basic economic decision?

Accepted Answer

A)   What goods and services should be produced and in what quantities.
B)   How goods and services should be produced.
C)   What prices should be charged for the goods and services.
D)   To whom the goods and services should be distributed.

Question 14

A weakness of a planned economy is:

Accepted Answer

A)   goods and services most valued by buyers may not be produced.
B)   government planners may be unable to effectively plan due to the complexity of resource allocation decisions.
C)   air and water pollution may result from planners' failures to take the environment into account in many of their decisions.
D)   all of the above.

Question 15

When a market economy fails to achieve a societal goal, such as clean air, then 
_________ _________ has occurred.

Accepted Answer

The answer of When a market economy fails to achieve...

Question 16

Which of the following statements best describes the relationship among scarcity, economic decisions, and economic systems?

Accepted Answer

A)   The economic system that a society chooses determines whether or not it faces a scarcity problem.
B)   The choice of an economic system depends on which basic economic decisions a society must make.
C)   Scarcity forces a society to choose an economic system which, in turn, defines which economic decisions it must make.
D)   Scarcity imposes basic economic decisions on a society that are made through the type of economic system it chooses.

Question 17

Use the following figure.

-The type of economy advocated by Adam Smith in The Wealth of Nations would operate at or near point:

Accepted Answer

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

Question 18

A socialist system favors collective ownership of society's factors of production.

Accepted Answer

A) True 
 B)False

Question 19

Circular flow model.
 
-If line (1)  represents the flow of goods and services, then:

Accepted Answer

A)   line (2)  is a money flow.
B)   box B represents businesses.
C)   box C represents input markets.
D)   all of the above.

Question 20

The economic system, important in Britain in the 17th and 18th centuries, in which national economic interests outweighed individuals' economic interests, was:

Accepted Answer

A)   mercantilism.
B)   market socialism.
C)   laissez-fair capitalism.
D)   a free enterprise system.

Exam 2: Economic Decision Making and Economic Systems

Briefly explain each of the three basic economic decisions every society must make.

Correct AnswerverifiedEvery society must make a deci...View AnswerShow Answer

The _______ Industrial Revolution had a profound effect on the country of the _______ _______.

Correct AnswerverifiedBritish; U...View AnswerShow Answer

What type of economic system best describes the U.S. economy in the 21st century? Why?

Correct AnswerverifiedThe US has primarily a mixed economy: th...View AnswerShow Answer

Circular flow model. -If line (1) represents the flow of goods and services, then:

Correct AnswerverifiedShow Answer

Why is it in the best interest of a business in a market economy to use the least-cost method of production?

Correct AnswerverifiedA firm's profits are the diffe...View AnswerShow Answer

In your opinion, do firms in a market economy respond to consumer preferences, or create consumer preferences? Why?

Correct AnswerverifiedBoth. Firms respond to preferences by mo...View AnswerShow Answer

Mercantilism:

Correct AnswerverifiedShow Answer

A country that allows no market activity in making the basic economic choices has a:

Correct AnswerverifiedShow Answer

Markets are important in economies where decisions are made:

Correct AnswerverifiedShow Answer

A socialist system favors collective ownership of society's factors of production.

Correct AnswerverifiedShow Answer

When a market economy fails to achieve a societal goal, such as clean air, then _________ _________ has occurred.

Correct AnswerverifiedShow Answer

Use the following figure. -The type of economy advocated by Adam Smith in The Wealth of Nations would operate at or near point:

Correct AnswerverifiedShow Answer

The economic system, important in Britain in the 17th and 18th centuries, in which national economic interests outweighed individuals' economic interests, was:

Correct AnswerverifiedShow Answer

Which of the following transactions would occur in a product market?

Correct AnswerverifiedShow Answer

Circular flow model. -If line 3 represents the flow of income to resource owners, then line 1 represents the flow of:

Correct AnswerverifiedShow Answer

Which of the following statements is FALSE?

Correct AnswerverifiedShow Answer

Which of the following is not a basic economic decision?

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An example of government intervention in output markets would be:

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A weakness of a planned economy is:

Correct AnswerverifiedShow Answer

Which of the following statements best describes the relationship among scarcity, economic decisions, and economic systems?

Correct AnswerverifiedShow Answer

Correct Answer
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Every society must make a deci...
View Answer

The ___ Industrial Revolution had a profound effect on the country of the _ _____.

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British; U...
View Answer

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The US has primarily a mixed economy: th...
View Answer

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A firm's profits are the diffe...
View Answer

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Both. Firms respond to preferences by mo...
View Answer

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When a market economy fails to achieve a societal goal, such as clean air, then _ _ has occurred.

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