Question 1

The strength of a market system is:

Accepted Answer

A)   it encourages businesses to produce in an efficient manner.
B)   it encourages people to acquire skills that are valued by employers.
C)   information passes directly between buyers and sellers, facilitating rapid adaptation of economic processes to changing conditions.
D)   all of the above.

Question 2

Cost-minimizing efforts by businesses that lead to pollution or inferior products are examples of:

Accepted Answer

A)   project risk.
B)   market failure.
C)   command breakdown.
D)   all of the above.

Question 3

You would expect a society with a traditional economy to have most of its economic activity directed toward:

Accepted Answer

A)   agriculture.
B)   manufacturing.
C)   production of services.
D)   real estate management.

Question 4

In a market economy, because owners of businesses are motivated by profits, they will choose the least cost method of production.

Accepted Answer

A) True 
 B)False

Question 5

When centralized planning creates a problem for a society or fails to achieve a society's goals, there is:

Accepted Answer

A)   planning gap.
B)   planning failure.
C)   market replacement.
D)   no alternative but to go to a pure market economy.

Question 6

Free enterprise refers to the right of:

Accepted Answer

A)   businesses to make their own decisions and operate with a profit motive.
B)   society to demand that certain essential products be made available free of charge.
C)   businesses that produce products that help the poor to be exempt from paying taxes.
D)   none of the above.

Question 7

The Sherman and Clayton Acts were passed to help maintain U.S. laborers' living and working conditions.

Accepted Answer

A) True 
 B)False

Question 8

The economic system where private individuals own the factors of production is:

Accepted Answer

A)   socialism.
B)   capitalism.
C)   collectivism.
D)   a people's republic.

Question 9

After the Civil War, the industrial boom in the U.S. was propelled by changes in:

Accepted Answer

A)   agriculture and real estate.
B)   agriculture and the service industry.
C)   communications and transportation.
D)   communications and the service industry.

Question 10

Circular flow model.
 
-The flow of food, bicycles, and other products to their final users is shown by line:

Accepted Answer

A)   (1) .
B)   (2) .
C)   (3) .
D)   (4) .

Question 11

Circular flow model.
 
-If line (4)  represents the flow of resources, then households are represented by:

Accepted Answer

A)   box A.
B)   box B.
C)   box C.
D)   box D.

Question 12

What role do prices play in the communication between buyers and sellers in a market economy?

Accepted Answer

Prices aggregate information and relay t...

Question 13

The main influence planners have over how goods and services will be produced in a planned economy is through:

Accepted Answer

A)   allowing businesses to earn a profit.
B)   imprisoning producers who do not operate according to the plan.
C)   determining which factors of production and processes will be made available to producers.
D)   threatening to have products produced in foreign countries if they are not produced according to the plan at home.

Question 14

Which of the following statements describing a market economy is FALSE?

Accepted Answer

A)   Households only buy and businesses only sell.
B)   Price is the language through which buyers and sellers communicate.
C)   The basic economic decisions are made by households and businesses.
D)   Households and businesses interact in markets to make economic decisions.

Question 15

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

Accepted Answer

A)   Taking a job designing websites.
B)   Renting an automobile while on vacation.
C)   Taking your dog to the vet for a check-up.
D)   Purchasing a computer to do your class assignments.

Question 16

According to the circular flow model, rent, wages, interest, and profit flow from:

Accepted Answer

A)   households to businesses in input markets.
B)   businesses to households in input markets.
C)   households to businesses in output markets.
D)   businesses to households in output markets.

Question 17

Unlike the New Deal, the election of President Obama has increased the role of the government in the economy.

Accepted Answer

A) True 
 B)False

Question 18

Free enterprise exists where:

Accepted Answer

A)   limits are set on how much government can tax.
B)   businesses can make their own decisions and seek profits.
C)   the government provides free goods and services to the needy.
D)   resources are publicly owned and available free to anyone who wants to produce goods and services.

Question 19

Explain how economic decision making differs between a market economy and a planned economy.

Accepted Answer

In a market economy, decisions...

Question 20

A socialist system:

Accepted Answer

A)   shares the same essential features as capitalism, but attempts to equalize the distribution of income.
B)   has collective ownership of many factors of production and attempts to equalize the distribution of income.
C)   depends exclusively on planning to decide what goods and services will be produced, and exclusively on markets to decide how they will be distributed.
D)   none of the above.

Exam 2: Economic Decision Making and Economic Systems

According to the circular flow model, rent, wages, interest, and profit flow from:

Correct AnswerverifiedShow Answer

Which of the following statements describing a market economy is FALSE?

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Circular flow model. -The flow of food, bicycles, and other products to their final users is shown by line:

Correct AnswerverifiedShow Answer

Unlike the New Deal, the election of President Obama has increased the role of the government in the economy.

Correct AnswerverifiedShow Answer

Free enterprise refers to the right of:

Correct AnswerverifiedShow Answer

The main influence planners have over how goods and services will be produced in a planned economy is through:

Correct AnswerverifiedShow Answer

The economic system where private individuals own the factors of production is:

Correct AnswerverifiedShow Answer

After the Civil War, the industrial boom in the U.S. was propelled by changes in:

Correct AnswerverifiedShow Answer

The Sherman and Clayton Acts were passed to help maintain U.S. laborers' living and working conditions.

Correct AnswerverifiedShow Answer

Cost-minimizing efforts by businesses that lead to pollution or inferior products are examples of:

Correct AnswerverifiedShow Answer

Explain how economic decision making differs between a market economy and a planned economy.

Correct AnswerverifiedIn a market economy, decisions...View AnswerShow Answer

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

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You would expect a society with a traditional economy to have most of its economic activity directed toward:

Correct AnswerverifiedShow Answer

The strength of a market system is:

Correct AnswerverifiedShow Answer

A socialist system:

Correct AnswerverifiedShow Answer

Circular flow model. -If line (4) represents the flow of resources, then households are represented by:

Correct AnswerverifiedShow Answer

When centralized planning creates a problem for a society or fails to achieve a society's goals, there is:

Correct AnswerverifiedShow Answer

Free enterprise exists where:

Correct AnswerverifiedShow Answer

In a market economy, because owners of businesses are motivated by profits, they will choose the least cost method of production.

Correct AnswerverifiedShow Answer

What role do prices play in the communication between buyers and sellers in a market economy?

Correct AnswerverifiedPrices aggregate information and relay t...View AnswerShow Answer

Correct Answer
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In a market economy, decisions...
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Prices aggregate information and relay t...
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