Question 1

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

Accepted Answer

A)   output decisions of business firms.
B)   income plans of households.
C)   spending decisions of households.
D)   workers' technical skills.E) None of the above
F) A) and B)

Question 2

Issues of the distribution of goods and services and incomes in a competitive market system are the primary topic of which fundamental question?

Accepted Answer

A)   What goods and services will be produced?
B)   How will the goods and services be produced?
C)   How will the system promote progress?
D)   Who will get the goods and services?E) B) and D)
F) A) and D)

Question 3

A prerequisite of specialization is:

Accepted Answer

A)   a capitalistic economic system.
B)   a medium of exchange or money system.
C)   free enterprise.
D)   competition.E) A) and B)
F) A) and C)

Question 4

The economy of the United States can best be described as pure capitalism.

Accepted Answer

A) True 
 B)False

Question 5

Command systems in the Soviet Union and Eastern Europe failed primarily because of coordination and incentive problems.

Accepted Answer

A) True 
 B)False

Question 6

In the U.S.economy,sole proprietorships account for over half the firms and over half of total sales revenue.

Accepted Answer

A) True 
 B)False

Question 7

How do workers typically express self-interest?

Accepted Answer

A)   By minimizing the economic losses of other business firms
B)   By maximizing the economic profits of other business firms
C)   By seeking the highest price when purchasing a consumer product
D)   By seeking jobs with the best combination of wages and benefitsE) A) and D)
F) B) and C)

Question 8

In a circular flow model consisting of the household sector,the business sector,product markets,and resource markets:

Accepted Answer

A)   households are sellers of products.
B)   businesses are sellers of products.
C)   households are buyers of productive resources.
D)   resource markets are sellers of products.E) B) and D)
F) B) and C)

Question 9

According to the text,U.S.corporations generate approximately what percentage of total sales revenue?

Accepted Answer

A)   11 percent
B)   20 percent
C)   72 percent
D)   82 percentE) A) and D)
F) B) and D)

Question 10

In a capitalistic economy:

Accepted Answer

A)   consumers are not sovereign.
B)   markets are not competitive.
C)   there is a reliance on the market system.
D)   the government owns the means of production.E) None of the above
F) C) and D)

Question 11

Which is an example of barter?

Accepted Answer

A)   A person trading a desk for a box of tools
B)   A person buying clothes at a used clothing store
C)   A gift of tuition money from parents to their children
D)   The purchase of stock on the New York Stock ExchangeE) None of the above
F) B) and C)

Question 12

Competition is more likely to exist when:

Accepted Answer

A)   there is free entry into and exit out of industries.
B)   there is a single supplier of all goods and services.
C)   the government purchases most goods and services.
D)   products are produced by a few large firms.E) B) and D)
F) All of the above

Question 13

In the circular flow model,households function on the selling side of the resource market and the buying side of product markets.

Accepted Answer

A) True 
 B)False

Question 14

Durable goods are expected to last for at least 10 years.

Accepted Answer

A) True 
 B)False

Question 15

All economic systems must answer certain fundamental economic questions.Which is not one of these questions?

Accepted Answer

A)   Which actions should government take to reduce inflation?
B)   How will the goods and services be produced?
C)   What goods and services will be produced?
D)   Who is to receive the output?E) A) and B)
F) B) and D)

Question 16

In a competitive market economy,firms and resource suppliers will seek to further their own self-interest,but at the same time,as if guided by an "invisible hand," they will promote the public interest.

Accepted Answer

A) True 
 B)False

Question 17

The maximization of profit and the minimization of losses is the primary factor affecting the economic decision making of:

Accepted Answer

A)   workers.
B)   consumers.
C)   public officials.
D)   entrepreneurs.E) B) and C)
F) None of the above

Question 18

The institution of private property is supported by clear claims to ownership.

Accepted Answer

A) True 
 B)False

Question 19

An important part of the market system is that producers and consumers consider the public interest in making production and consumption decisions.

Accepted Answer

A) True 
 B)False

Question 20

The basic economic argument for the market system is that it promotes:

Accepted Answer

A)   an efficient allocation of resources.
B)   equality in the distribution of income.
C)   personal freedom.
D)   the use of money.E) A) and B)
F) None of the above

Exam 2: The Market System and the Circular Flow

In the circular flow model,households function on the selling side of the resource market and the buying side of product markets.

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In a capitalistic economy:

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How do workers typically express self-interest?

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All economic systems must answer certain fundamental economic questions.Which is not one of these questions?

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The economy of the United States can best be described as pure capitalism.

Correct AnswerverifiedShow Answer

In a circular flow model consisting of the household sector,the business sector,product markets,and resource markets:

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A prerequisite of specialization is:

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The maximization of profit and the minimization of losses is the primary factor affecting the economic decision making of:

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Competition is more likely to exist when:

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In a competitive market economy,firms and resource suppliers will seek to further their own self-interest,but at the same time,as if guided by an "invisible hand," they will promote the public interest.

Correct AnswerverifiedShow Answer

The institution of private property is supported by clear claims to ownership.

Correct AnswerverifiedShow Answer

An important part of the market system is that producers and consumers consider the public interest in making production and consumption decisions.

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According to the text,U.S.corporations generate approximately what percentage of total sales revenue?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the U.S.economy,sole proprietorships account for over half the firms and over half of total sales revenue.

Correct AnswerverifiedShow Answer

Durable goods are expected to last for at least 10 years.

Correct AnswerverifiedShow Answer

The basic economic argument for the market system is that it promotes:

Correct AnswerverifiedShow Answer

Command systems in the Soviet Union and Eastern Europe failed primarily because of coordination and incentive problems.

Correct AnswerverifiedShow Answer

Issues of the distribution of goods and services and incomes in a competitive market system are the primary topic of which fundamental question?

Correct AnswerverifiedShow Answer

Which is an example of barter?

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