Question 1

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 2

An increase in demand for strawberries is most likely to:

Accepted Answer

A)   increase the demand for strawberry pickers.
B)   reduce the supply of strawberry pickers.
C)   reduce the supply of strawberries.
D)   reduce the demand for strawberry pickers.E) C) and D)
F) A) and B)

Question 3

In the simple circular flow model businesses are suppliers of final products.

Accepted Answer

A) True 
 B)False

Question 4

Specialization in production is important primarily because it:

Accepted Answer

A)   results in greater total output.
B)   allows society to avoid the coincidence-of-wants problem.
C)   allows society to trade by barter.
D)   allows society to have fewer capital goods.E) A) and C)
F) A) and B)

Question 5

The term dollar votes means:

Accepted Answer

A)   inflation will occur if consumers don't spend wisely.
B)   voters may be offered dollars to help elect certain political candidates.
C)   government is responsible for determining what will be considered legal tender.
D)   consumers "vote" for certain products to be produced by how they spend their incomes.E) B) and C)
F) None of the above

Question 6

Which is the main problem with the barter system of exchange? Barter:

Accepted Answer

A)   encourages self-interest and selfishness.
B)   fosters specialization and division of labour.
C)   requires a coincidence of wants.
D)   undermines the right to bequeath.E) B) and D)
F) A) and B)

Question 7

"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) B) and C)
F) A) and B)

Question 8

_____ helps avoid the problems posed by the lack of double coincidence of wants.

Accepted Answer

A)   Barter
B)   Trade
C)   Money
D)   Freedom of choiceE) B) and C)
F) A) and C)

Question 9

The market system is characterized by:

Accepted Answer

A)   extensive government constraints on individual behaviour.
B)   private ownership of the means of production.
C)   government control of all production decisions.
D)   government rationing of all goods and services.E) B) and D)
F) All of the above

Question 10

Which is characteristic of the capitalistic ideology?

Accepted Answer

A)   unselfish individuals
B)   centralized decision-making
C)   free enterprise and choice
D)   government ownership of the means of productionE) None of the above
F) B) and C)

Question 11

Which statement accurately summarizes the relationship between the prices of goods and their relative scarcity?

Accepted Answer

A)   The price of a good is a direct function of the relative scarcity of the good.
B)   The price of a good is an inverse function of the relative scarcity of the good.
C)   The price of a good is independent of the relative scarcity of the good.
D)   High prices lead to greater relative scarcity.E) A) and C)
F) A) and B)

Question 12

The economy of North Korea most closely approximates:

Accepted Answer

A)   pure capitalism
B)   a command economy
C)   market socialism
D)   authoritarian capitalismE) A) and B)
F) All of the above

Question 13

-Refer to the figure. If box A represents businesses and flow (7)  represents goods and services, then:

Accepted Answer

A)   box D is the product market and box B is the factor market.
B)   box D is the product market and box B is households.
C)   box B is the product market and box C is households.
D)   box C is the product market and box B is the factor market.E) C) and D)
F) B) and D)

Question 14

Competition means that:

Accepted Answer

A)   sellers can cause artificial product scarcities and thereby manipulate market price.
B)   there are large numbers of independently acting buyers and sellers in each market.
C)   a given product can be purchased at a number of different prices.
D)   there is only one seller in a market.E) B) and D)
F) None of the above

Question 15

The term consumer sovereignty means that:

Accepted Answer

A)   consumers are controlled by the actions of the marketplace.
B)   what is produced is ultimately determined by what consumers buy.
C)   there are no limits on what consumers may buy under capitalism.
D)   businesses produce with consumer satisfaction as their primary goal.E) B) and C)
F) A) and D)

Question 16

The simple circular flow model shows that:

Accepted Answer

A)   households are on the demand side of both product and factor markets.
B)   businesses are on the supply side of both product and factor markets.
C)   households are on the supply side of the factor market and on the demand side of the product market.
D)   businesses are on the demand side of the product market and on the supply side of the factor market.E) None of the above
F) B) and C)

Question 17

The wants of consumers are expressed on the demand side of the product market.

Accepted Answer

A) True 
 B)False

Question 18

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) All of the above
F) B) and C)

Question 19

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

Question 20

The development of MP3 players that significantly reduce the market for CDs and DVDs would be an example of:

Accepted Answer

A)   specialization.
B)   derived demand.
C)   roundabout production.
D)   creative destruction.E) B) and C)
F) A) and D)

Exam 2: The Market System and the Circular Flow

Competition means that:

Correct AnswerverifiedShow Answer

"Consumer sovereignty" refers to the:

Correct AnswerverifiedShow Answer

Which is the main problem with the barter system of exchange? Barter:

Correct AnswerverifiedShow Answer

-Refer to the figure. If box A represents businesses and flow (7) represents goods and services, then:

Correct AnswerverifiedShow Answer

The term consumer sovereignty means that:

Correct AnswerverifiedShow Answer

In the simple circular flow model businesses are suppliers of final products.

Correct AnswerverifiedShow Answer

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

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

Which is characteristic of the capitalistic ideology?

Correct AnswerverifiedShow Answer

Specialization in production is important primarily because it:

Correct AnswerverifiedShow Answer

_____ helps avoid the problems posed by the lack of double coincidence of wants.

Correct AnswerverifiedShow Answer

The economy of North Korea most closely approximates:

Correct AnswerverifiedShow Answer

The term dollar votes means:

Correct AnswerverifiedShow Answer

An increase in demand for strawberries is most likely to:

Correct AnswerverifiedShow Answer

The market system is characterized by:

Correct AnswerverifiedShow Answer

The simple circular flow model shows that:

Correct AnswerverifiedShow Answer

The development of MP3 players that significantly reduce the market for CDs and DVDs would be an example of:

Correct AnswerverifiedShow Answer

In the simple circular flow model:

Correct AnswerverifiedShow Answer

The wants of consumers are expressed on the demand side of the product market.

Correct AnswerverifiedShow Answer

Which statement accurately summarizes the relationship between the prices of goods and their relative scarcity?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified