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Exam 2: The Market System and the Circular Flow

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Question 21

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Broadly defined,competition involves:

A) private property and freedom of expression.
B) independently acting buyers and sellers and freedom to enter or leave markets.
C) increasing opportunity costs and diminishing marginal utility.
D) capital goods and division of labor.

E) B) and C)
F) A) and D)

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Question 22

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Which of the following is not one of the five fundamental questions?

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

E) A) and D)
F) A) and B)

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Question 23

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Which of the following is a fundamental characteristic of the market system?

Economic profits in an industry suggest the industry:

Which of the following is a distinguishing feature of a command system?

Copyrights and trademarks are examples of:

Examples of command economies are:

In a market system:

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that:

"Because the outputs of many industries are the inputs to other industries,the failure of any single industry to fulfill the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the:

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

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

The market system's answer to the fundamental question "How will the system promote progress?" is essentially:

The term "laissez-faire" suggests that:

The use of money contributes to economic efficiency because:

In terms of the circular flow diagram,households make expenditures in the _____ market and receive income through the _____ market.

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially:

Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below.Assume the prices of labor and capital are $2 and $3 respectively. $\quad$$\quad$$\quad$$\quad$$\underline{\text { Production Techniques: }}$ $\begin{array}{c}\begin{array}{lll}\\\text { Labor}\\\text { Capital} \end{array}\begin{array}{c}1\\\hline 4 \\2\end{array}\begin{array}{c}II \\\hline 3 \\3 \end{array}\begin{array}{c}III\\\hline2 \\5\end{array}\begin{array}{c} IV \\\hline 5 \\1 \end{array} \end{array}$ Refer to the information.Which technique is economically most efficient in producing A?

A fundamental difference between the command system and laissez-faire capitalism is that,in command systems:

Firms are motivated to minimize production costs because: