Question 1

Today, Venezuela's economy is

Accepted Answer

A)  thriving, thanks to Bolivarian Socialism.
B)  expanding due to the clever idea of printing money to pay the government's bills.
C)  considered a laissez-faire economic system.
D)  ruined due to actions of incompetent political leaders.E) A) and B)
F) A) and C)

Question 2

Which of the following is not a major category of business structure?

Accepted Answer

A)  sole proprietorship
B)  partnership
C)  public agency
D)  corporationE) B) and C)
F) None of the above

Question 3

Which of the following is one of the Five Fundamental Questions?

Accepted Answer

A)  Which products should be subsidized?
B)  How will the goods and services be produced?
C)  How much should society save?
D)  Which products should be taxed?E) None of the above
F) A) and B)

Question 4

Which of the following does not illustrate the idea of creative destruction?

Accepted Answer

A)  Digital downloads have shrunk the market for CDs and DVDs.
B)  Online retail sales have increased, while brick-and-mortar sales have slowed down.
C)  The opening of a new mall reduces the traffic in another mall.
D)  A firm has to destroy some of the expired products in its inventory.E) A) and B)
F) None of the above

Question 5

The simple circular flow model shows that workers and capital owners offer their services to firms through the

Accepted Answer

A)  product markets.
B)  resource markets.
C)  money markets.
D)  financial markets.E) A) and D)
F) B) and C)

Question 6

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

Accepted Answer

A)  Ample regulation of business by the government will maximize the public's best interests.
B)  The market system works best when resources are free to move from one use to another.
C)  The problem of scarcity can best be overcome in a system of mixed capitalism.
D)  Self-interest in a market system will automatically promote the public interest as well.E) C) and D)
F) B) and D)

Question 7

The Bitcoin currency is issued by

Accepted Answer

A)  the United States Federal Reserve.
B)  the United States Treasury.
C)  the World Bank.
D)  no government of any country.E) A) and B)
F) C) and D)

Question 8

International specialization and trade

Accepted Answer

A)  must be done on a barter system.
B)  often requires the exchange of currencies.
C)  does not illustrate the division of labor.
D)  requires active government regulation.E) None of the above
F) A) and B)

Question 9

In the simple circular flow model,

Accepted Answer

A)  households are buyers of resources.
B)  businesses are sellers of final products.
C)  households are sellers of final products.
D)  there are real flows of goods, services, and resources, but not money flows.E) B) and D)
F) A) and B)

Question 10

The coordination problem in the centrally planned economies refers to the idea that

Accepted Answer

A)  planners had to direct required inputs to each enterprise.
B)  the price level and the level of employment were inversely related.
C)  the immediate effect of more investment was less consumption.
D)  exports had to be equal to imports for a central plan to work.E) None of the above
F) A) and B)

Question 11

Economic systems differ according to which two main characteristics?

Accepted Answer

A)  who owns the factors of production and the methods used to coordinate economic activity
B)  the technology used in production and the quantity and quality of natural resources
C)  how goods are produced and who gets them
D)  the political system in place and the degree of scarcity facing the economyE) B) and C)
F) C) and D)

Question 12

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

Accepted Answer

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) B) and C)

Question 13

The invisible hand refers to the

Accepted Answer

A)  fact that the U.S. 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) C) and D)
F) B) and D)

Question 14

Money functions as a medium of exchange by eliminating the need for a coincidence of wants.

Accepted Answer

A) True 
 B)False

Question 15

Property rights are important because they

Accepted Answer

A)  ensure an equal distribution of income.
B)  encourage cooperation by improving the chances of mutually agreeable transactions.
C)  guarantee that any exchange will make all parties better off than prior to the exchange.
D)  allow the government to control how resources are allocated.E) All of the above
F) A) and D)

Question 16

The French term "laissez-faire" means

Accepted Answer

A)  "there is no free lunch."
B)  "let it be."
C)  "circular flow."
D)  "public ownership."E) C) and D)
F) A) and D)

Question 17

In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

Accepted Answer

A) True 
 B)False

Question 18

One major element of the command system is

Accepted Answer

A)  an emphasis on private ownership of resources.
B)  individual decentralized decision making.
C)  reliance on supply-and-demand forces to guide economic activity.
D)  central planning conducted by the government.E) A) and D)
F) A) and C)

Question 19

The advent of Netflix movie streaming and Redbox kiosks renting DVD and Blu-ray movies have virtually demolished the market for video rentals from brick and mortar stores such as Blockbuster. This is an example of

Accepted Answer

A)  creative destruction.
B)  derived demand.
C)  capital accumulation.
D)  the difference between normal and economic profits.E) B) and D)
F) A) and C)

Question 20

Explain the main characteristics of a corporation.

Accepted Answer

A corporation is an independent legal en...

Exam 2: The Market System and the Circular Flow

The Bitcoin currency is issued by

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Money functions as a medium of exchange by eliminating the need for a coincidence of wants.

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

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International specialization and trade

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Explain the main characteristics of a corporation.

Correct AnswerverifiedA corporation is an independent legal en...View AnswerShow Answer

Today, Venezuela's economy is

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Economic systems differ according to which two main characteristics?

Correct AnswerverifiedShow Answer

Which of the following is not a major category of business structure?

Correct AnswerverifiedShow Answer

One major element of the command system is

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The advent of Netflix movie streaming and Redbox kiosks renting DVD and Blu-ray movies have virtually demolished the market for video rentals from brick and mortar stores such as Blockbuster. This is an example of

Correct AnswerverifiedShow Answer

Property rights are important because they

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

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In the simple circular flow model,

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The invisible hand refers to the

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The French term "laissez-faire" means

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In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

Correct AnswerverifiedShow Answer

The coordination problem in the centrally planned economies refers to the idea that

Correct AnswerverifiedShow Answer

The simple circular flow model shows that workers and capital owners offer their services to firms through the

Correct AnswerverifiedShow Answer

Which of the following is one of the Five Fundamental Questions?

Correct AnswerverifiedShow Answer

Which of the following does not illustrate the idea of creative destruction?

Correct AnswerverifiedShow Answer

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A corporation is an independent legal en...
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