Question 1

In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?

Accepted Answer

A)  partnerships
B)  corporations
C)  sole proprietorships
D)  in all the businesses listed in the other answersE) A) and B)
F) B) and D)

Question 2

The Heritage Foundation in 2018 ranked which of the following economies to have the highest economic freedom?

Accepted Answer

A)  the United States
B)  Germany
C)  Japan
D)  Hong KongE) All of the above
F) C) and D)

Question 3

In a command system,

Accepted Answer

A)  self-interest motivates and commands each business firm's decisions and actions.
B)  the head of each family decides and commands what to do with the family's resources.
C)  a government-appointed planning board makes production and allocation decisions.
D)  market traders command what outputs are produced and how they are allocated.E) C) and D)
F) All of the above

Question 4

Why might a company use barter rather than money to make a trade?

Accepted Answer

A)  Barter trade is generally more efficient than money-based trade.
B)  Barter can enable two firms to trade when their cash flows are limited.
C)  Money requires a coincidence of wants; barter is more direct.
D)  Money is efficient only for large transactions, so barter is preferred for smaller transactions.E) All of the above
F) A) and B)

Question 5

In a market system, a consumer's ability to pay-but not necessarily his willingness to pay-is largely based on his income.

Accepted Answer

A) True 
 B)False

Question 6

The government may not implement policies intended to redistribute income in which of the following economic systems?

Accepted Answer

A)  laissez-faire capitalism
B)  command systems
C)  a mixed economy
D)  the market systemE) A) and D)
F) B) and D)

Question 7

What is the relationship between businesses and households in the circular flow diagram?

Accepted Answer

Households buy the goods and services th...

Question 8

Refer to the diagram. Flow 2 represents

Accepted Answer

A)  wage, rent, interest, and profit income.
B)  land, labor, capital, and entrepreneurial ability.
C)  goods and services.
D)  consumer expenditures.E) C) and D)
F) B) and D)

Question 9

In a market system, entrepreneurs start businesses in order to earn a high salary.

Accepted Answer

A) True 
 B)False

Question 10

In a market system, which of the following will eliminate high-cost producers and allow only the low-cost producers to survive?

Accepted Answer

A)  competition
B)  money
C)  a sovereign government
D)  specializationE) B) and C)
F) All of the above

Question 11

Innovation lagged in the centrally planned economies because

Accepted Answer

A)  there was too much domestic business competition.
B)  there was too much competition from foreign firms.
C)  enterprises resisted innovation in fear that their production targets would be raised.
D)  exports had to equal imports for the plan to work.E) None of the above
F) B) and C)

Question 12

Explain the term "laissez faire capitalism."

Accepted Answer

This is a hypothetical economic system i...

Question 13

"Creative destruction" in a market system is brought about by

Accepted Answer

A)  entrepreneurship.
B)  striking workers.
C)  regulation by the government.
D)  money-based trade.E) B) and C)
F) B) and D)

Question 14

Which of the following would be primarily determined in the resource markets?

Accepted Answer

A)  the airfares charged by airlines for family vacations
B)  the wage rates for computer programmers and engineers
C)  the number of home-Internet connections installed
D)  the amount of money in circulation issued by the governmentE) A) and B)
F) C) and D)

Question 15

Which is an example of barter?

Accepted Answer

A)  a person trades a desk for a box of tools
B)  a person buys 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) B) and D)
F) C) and D)

Question 16

In analyzing a market system, economists often assume that firms will choose the production techniques that will give them maximum revenues.

Accepted Answer

A) True 
 B)False

Question 17

The money income of households consists of all the following, except

Accepted Answer

A)  wages.
B)  profits.
C)  interest.
D)  revenues.E) C) and D)
F) All of the above

Question 18

According to the circular flow model of the market system, firms get their ability to pay for their costs of production from the revenues that they receive for their products.

Accepted Answer

A) True 
 B)False

Question 19

A required element for specialization to lead to an increase in the satisfaction of society's wants is

Accepted Answer

A)  a capitalist economy.
B)  exchange and trade.
C)  the use of money.
D)  a central plan.E) A) and C)
F) B) and C)

Question 20

In a market system, if firms in an industry persistently earn total revenues that are less than total costs, then that industry will

Accepted Answer

A)  have some firms go out of business.
B)  attract more resources toward it.
C)  experience entry of new firms.
D)  get government protection from failure.E) B) and D)
F) A) and B)

Exam 2: The Market System and the Circular Flow

In a market system, a consumer's ability to pay-but not necessarily his willingness to pay-is largely based on his income.

Correct AnswerverifiedShow Answer

The money income of households consists of all the following, except

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In analyzing a market system, economists often assume that firms will choose the production techniques that will give them maximum revenues.

Correct AnswerverifiedShow Answer

In a command system,

Correct AnswerverifiedShow Answer

Which is an example of barter?

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Refer to the diagram. Flow 2 represents

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In a market system, if firms in an industry persistently earn total revenues that are less than total costs, then that industry will

Correct AnswerverifiedShow Answer

Which of the following would be primarily determined in the resource markets?

Correct AnswerverifiedShow Answer

In a market system, which of the following will eliminate high-cost producers and allow only the low-cost producers to survive?

Correct AnswerverifiedShow Answer

According to the circular flow model of the market system, firms get their ability to pay for their costs of production from the revenues that they receive for their products.

Correct AnswerverifiedShow Answer

Why might a company use barter rather than money to make a trade?

Correct AnswerverifiedShow Answer

A required element for specialization to lead to an increase in the satisfaction of society's wants is

Correct AnswerverifiedShow Answer

"Creative destruction" in a market system is brought about by

Correct AnswerverifiedShow Answer

The government may not implement policies intended to redistribute income in which of the following economic systems?

Correct AnswerverifiedShow Answer

Innovation lagged in the centrally planned economies because

Correct AnswerverifiedShow Answer

Explain the term "laissez faire capitalism."

Correct AnswerverifiedThis is a hypothetical economic system i...View AnswerShow Answer

In a market system, entrepreneurs start businesses in order to earn a high salary.

Correct AnswerverifiedShow Answer

In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?

Correct AnswerverifiedShow Answer

The Heritage Foundation in 2018 ranked which of the following economies to have the highest economic freedom?

Correct AnswerverifiedShow Answer

What is the relationship between businesses and households in the circular flow diagram?

Correct AnswerverifiedHouseholds buy the goods and services th...View AnswerShow Answer

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This is a hypothetical economic system i...
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Households buy the goods and services th...
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