Question 1

If an increase occurs in the demand for product X, we would expect all of the following to occur except:

Accepted Answer

A)  an increase in the profits of industry X.
B)  an increase in the demand for resources employed by industry X.
C)  an increase in the output of industry X.
D)  a decrease in the prices of resources employed in industry X.E) A) and B)
F) A) and C)

Question 2

Economic efficiency would be primarily discussed in response to which of the fundamental questions about a competitive market economy?

Accepted Answer

A)  What will be produced?
B)  How will the goods and services be produced?
C)  How will the system accommodate change?
D)  Who is to receive the output?E) A) and B)
F) All of the above

Question 3

Money functions as a medium of exchange in permitting the ready comparison of the relative worth of heterogeneous products.

Accepted Answer

A) True 
 B)False

Question 4

Government alters the distribution of income by market intervention, in which case it modifies the prices established by market forces.

Accepted Answer

A) True 
 B)False

Question 5

The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of:

Accepted Answer

A)  a command system.
B)  a market system.
C)  communism.
D)  socialism.E) A) and B)
F) B) and D)

Question 6

A purely competitive economy assumes the existence in each industry of a:

Accepted Answer

A)  large number of small firms facing a large number of small buyers.
B)  few large firms facing a large number of small buyers.
C)  large number of small firms facing a few large buyers.
D)  few small firms facing a few small buyers.E) None of the above
F) A) and D)

Question 7

The "invisible hand" refers to the:

Accepted Answer

A)  fact that our tax system redistributes income from rich to poor.
B)  notion that, under competition, decisions motivated by self-interest promote the social interest.
C)  tendency of monopolistic sellers to raise prices above competitive levels.
D)  fact that government controls the functioning of the market system.E) B) and C)
F) A) and D)

Question 8

Which statement is correct?

Accepted Answer

A)  The operation of a market system eventually results in an equal distribution of income.
B)  Producers are "kings" in a market economy because they determine what is produced.
C)  The market system is efficient at allocation of resources, but not consumer goods to their most valued uses.
D)  Freedom of choice and enterprise are essential elements of the market system.E) A) and C)
F) B) and C)

Question 9

Which of the following best describes the "invisible hand" concept?

Accepted Answer

A)  The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.
B)  The non substitutability of resources gives rise to a conflict between private and public interests and the need for government intervention.
C)  Mixed capitalism is the best system for overcoming the scarce resources-unlimited wants problem.
D)  Central direction by the government will improve resource allocation in a capitalistic economy.E) All of the above
F) A) and D)

Question 10

In a capitalistic economy:

Accepted Answer

A)  consumers can never be sovereign.
B)  markets can never be competitive.
C)  there is a reliance on the market system.
D)  the government owns the means of production.E) A) and B)
F) A) and C)

Question 11

In the simple circular flow model:

Accepted Answer

A)  households are demanders of factors of production.
B)  businesses are suppliers of final products.
C)  households are suppliers of final products.
D)  there are real flows of goods, services, and factors, but not money flows.E) A) and B)
F) None of the above B

Question 12

"Consumer sovereignty" refers to the:

Accepted Answer

A)  fact that resource prices tend to be high relative to product prices in capitalistic economies.
B)  idea that the pursuit of self-interest will prove ultimately to be in the public interest.
C)  notion that the decisions of producers and resource suppliers with respect to the kinds and amounts of goods produced must be appropriate to consumer demands.
D)  fact that a federal agency exists to protect consumers from harmful and defective products.E) All of the above
F) C) and D)

Question 13

The coordination problem in command economies became more difficult as:

Accepted Answer

A)  the number of industries expanded.
B)  less quantitative targets were assigned to each industry.
C)  planning techniques improved.
D)  production cost decreased.E) A) and B)
F) A) and C)

Question 14

In the factor market:

Accepted Answer

A)  businesses borrow money capital from households.
B)  businesses sell services to households.
C)  households sell resources to businesses.
D)  firms sell raw materials to households.E) None of the above
F) B) and C) C

Question 15

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  True

Question 16

The idea that firms and resource suppliers in seeking to further their own self-interests in a competitive market economy also simultaneously promotes the public or social interest is a description of:

Accepted Answer

A)  the guiding function of prices.
B)  capital accumulation.
C)  the "invisible hand."
D)  dollar votes.E) B) and C)
F) A) and D)

Question 17

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) All of the above
F) A) and D)

Question 18

Consider a barter situation where you have pens and you want pencils.To achieve your objective there must be a(n) :

Accepted Answer

A)  use of capital goods.
B)  entry and exit from the market.
C)  large number of sellers.
D)  coincidence of wants.E) None of the above
F) A) and C)

Question 19

The "invisible hand" concept suggests that:

Accepted Answer

A)  market failures imply the need for a national economic plan.
B)  big businesses are inherently more efficient than small businesses.
C)  the competitiveness of a capitalistic market economy invariably diminishes over time.
D)  given competition, private and public interests will tend to coincide.E) A) and C)
F) None of the above

Question 20

The market system is said to be characterized by "consumer sovereignty." This is because:

Accepted Answer

A)  a large number of consumer goods are produced.
B)  the prices of consumer goods are regulated by government.
C)  consumer goods are more profitable than investment goods.
D)  of the role of consumers in determining what goods are produced.E) None of the above
F) B) and C)

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

If an increase occurs in the demand for product X, we would expect all of the following to occur except:

Correct AnswerverifiedShow Answer

Economic efficiency would be primarily discussed in response to which of the fundamental questions about a competitive market economy?

Correct AnswerverifiedShow Answer

Money functions as a medium of exchange in permitting the ready comparison of the relative worth of heterogeneous products.

Correct AnswerverifiedShow Answer

Government alters the distribution of income by market intervention, in which case it modifies the prices established by market forces.

Correct AnswerverifiedShow Answer

The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of:

Correct AnswerverifiedShow Answer

A purely competitive economy assumes the existence in each industry of a:

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The "invisible hand" refers to the:

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Which statement is correct?

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Which of the following best describes the "invisible hand" concept?

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In a capitalistic economy:

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In the simple circular flow model:

Correct AnswerverifiedB

"Consumer sovereignty" refers to the:

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The coordination problem in command economies became more difficult as:

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In the factor market:

Correct AnswerverifiedC

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 AnswerverifiedTrue

The idea that firms and resource suppliers in seeking to further their own self-interests in a competitive market economy also simultaneously promotes the public or social interest is a description of:

Correct AnswerverifiedShow Answer

How do workers typically express self-interest?

Correct AnswerverifiedShow Answer

Consider a barter situation where you have pens and you want pencils.To achieve your objective there must be a(n) :

Correct AnswerverifiedShow Answer

The "invisible hand" concept suggests that:

Correct AnswerverifiedShow Answer

The market system is said to be characterized by "consumer sovereignty." This is because:

Correct AnswerverifiedShow Answer

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B

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C

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True

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