Question 1

Assume the demand for product Y increases and the subsequent market system responses result in the production of more Y. This illustrates:

Accepted Answer

A)   that the concept of derived demand is inapplicable.
B)   that consumer sovereignty is inoperative in this economy.
C)   the scarcity function of prices.
D)   the directing or guiding function of prices.E) A) and B)
F) All of the above

Question 2

Today, China's economy most closely approximates:

Accepted Answer

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

Question 3

-Refer to the diagram. Arrows (3)  and (4)  represent:

Accepted Answer

A)   goods and services respectively.
B)   money incomes and consumer expenditures respectively.
C)   resources and goods respectively.
D)   consumer expenditures and money income respectively.E) All of the above
F) None of the above

Question 4

Given the information provided and assuming trade does occur between the provinces, we can expect:

Accepted Answer

A)   that there is no means by which British Columbia can obtain lettuce while specializing in the production of autos.
B)   that money will not be needed to accomplish the desired exchanges.
C)   money to flow counterclockwise from British Columbia to Ontario to Alberta.
D)   money to flow clockwise from British Columbia to Alberta to Ontario.E) B) and D)
F) All of the above C

Question 5

Which of the following is unique to a market economy system?

Accepted Answer

A)   the extensive use of capital goods
B)   private ownership of property resources
C)   specialization
D)   the use of moneyE) C) and D)
F) B) and D)

Question 6

The economy of the former Soviet Union was best described as:

Accepted Answer

A)   authoritarian capitalism.
B)   mixed capitalism.
C)   a command economy.
D)   market socialism.E) B) and C)
F) A) and C)

Question 7

The market system is an economic system that:

Accepted Answer

A)   produces more consumer goods than capital goods.
B)   produces more capital goods than consumer goods.
C)   gives private individuals and institutions the right to own resources used in production.
D)   gives the government the right to tax individuals and corporations for the production of capital goods.E) A) and D)
F) A) and C)

Question 8

-Refer to the diagram. Arrows (1)  and (2)  represent:

Accepted Answer

A)   goods and resources respectively.
B)   money incomes and output respectively.
C)   output and money incomes respectively.
D)   resources and goods respectively.E) A) and D)
F) None of the above D

Question 9

The division of labour means that:

Accepted Answer

A)   labour markets are geographically segmented.
B)   unskilled workers outnumber skilled workers.
C)   workers specialize in various production tasks.
D)   each worker performs a large number of tasks.E) None of the above
F) All of the above

Question 10

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

Accepted Answer

A)   output decisions of business firms.
B)   government.
C)   spending decisions of households.
D)   workers' technical skills.E) B) and D)
F) All of the above

Question 11

A characteristic of the market system is:

Accepted Answer

A)   extensive use of price controls.
B)   extensive use of barter.
C)   extensive use of capital goods.
D)   low interest rates.E) None of the above
F) A) and C)

Question 12

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

Accepted Answer

A)   product; financial
B)   factor; product
C)   product; factor
D)   capital; productE) None of the above
F) A) and B)

Question 13

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit.

Accepted Answer

A) True 
 B)False

Question 14

Specialization may be conducive to an expansion of total output even though the individuals involved may have identical abilities.

Accepted Answer

A) True 
 B)False

Question 15

"The 'dollar votes' of consumers ultimately determine the composition of output and the allocation of resources in a market economy." This statement best describes the concept of:

Accepted Answer

A)   derived demand.
B)   external costs and benefits.
C)   consumer sovereignty.
D)   the invisible hand.E) B) and D)
F) A) and C)

Question 16

The competitive market system:

Accepted Answer

A)   encourages innovation because government provides tax breaks and subsidies to those who develop new products or new productive techniques.
B)   discourages innovation because it is difficult to acquire additional capital in the form of new machinery and equipment.
C)   discourages innovation because firms want to get all the profits possible from existing machinery and equipment.
D)   encourages innovation because successful innovators are rewarded with economic profits.E) None of the above
F) A) and C)

Question 17

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

Question 18

The use of money for exchange:

Accepted Answer

A)   increases the use of barter.
B)   reduces consumer sovereignty.
C)   decreases the coincidence of wants.
D)   encourages more specialization in production.E) A) and D)
F) A) and B)

Question 19

The development of new technology and capital goods are essential elements for the market system. This is because:

Accepted Answer

A)   using more efficient production processes means more output for the economy.
B)   more capital goods means less future consumption goods.
C)   the standard of living and development of new technology are inversely related.
D)   the most direct methods of production are more efficient.E) None of the above
F) All of the above

Question 20

As opposed to the market system, in command economies:

Accepted Answer

A)   the reward for innovation is extensive.
B)   the reward for innovation does not exist.
C)   meeting the production targets are extremely important.
D)   the profit motives are extremely high.E) A) and B)
F) None of the above

Exam 2: The Market System and the Circular Flow

Assume the demand for product Y increases and the subsequent market system responses result in the production of more Y. This illustrates:

Correct AnswerverifiedShow Answer

Today, China's economy most closely approximates:

Correct AnswerverifiedC

-Refer to the diagram. Arrows (3) and (4) represent:

Correct AnswerverifiedShow Answer

Given the information provided and assuming trade does occur between the provinces, we can expect:

Correct AnswerverifiedC

Which of the following is unique to a market economy system?

Correct AnswerverifiedShow Answer

The economy of the former Soviet Union was best described as:

Correct AnswerverifiedShow Answer

The market system is an economic system that:

Correct AnswerverifiedShow Answer

-Refer to the diagram. Arrows (1) and (2) represent:

Correct AnswerverifiedD

The division of labour means that:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A characteristic of the market system is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Consumer sovereignty means that legislation now protects the rights of consumers to dispose of their incomes as they see fit.

Correct AnswerverifiedShow Answer

Specialization may be conducive to an expansion of total output even though the individuals involved may have identical abilities.

Correct AnswerverifiedShow Answer

"The 'dollar votes' of consumers ultimately determine the composition of output and the allocation of resources in a market economy." This statement best describes the concept of:

Correct AnswerverifiedShow Answer

The competitive market system:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The use of money for exchange:

Correct AnswerverifiedShow Answer

The development of new technology and capital goods are essential elements for the market system. This is because:

Correct AnswerverifiedShow Answer

As opposed to the market system, in command economies:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

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