Question 1

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) B) and D)
F) C) and D)

Question 2

Which of the following is a characteristic of a sole proprietorship?

Accepted Answer

A)   It is owned and managed by two or more people.
B)   It is an independent legal entity on its own.
C)   It is owned and managed by one person.
D)   The owner bears no personal responsibility for the debts of the business.E) B) and C)
F) A) and B)

Question 3

Most market economies, such as the U.S. and the U.K., allow government policies and actions aimed at
promoting economic growth and stability.

Accepted Answer

A) True 
 B)False

Question 4

In terms of the circular ﬂow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.

Accepted Answer

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

Question 5

"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) C) and D)
F) B) and C)

Question 6

A characteristic of the market system is

Accepted Answer

A)   extensive use of direct or manual methods of production.
B)   a focus on labor, as opposed to capital resources.
C)   reliance on the use of capital goods in indirect modes of production.
D)   avoidance of producing goods that do not satisfy consumer wants directly.E) A) and B)
F) A) and C)

Question 7

Refer to the provided ﬁgure. If box A represents households, D the resource market, and C businesses, then ﬂow (8)  would represent ___, while ﬂow (7)  would represent ___.

Accepted Answer

A)   goods and services; consumption expenditures
B)   consumption expenditures; goods and services
C)   resources; money income
D)   money income; resourcesE) B) and C)
F) A) and C)

Question 8

The economic function of proﬁts and losses is to

Accepted Answer

A)   bring about a more equal distribution of income.
B)   signal that resources should be reallocated.
C)   eliminate small ﬁrms and reduce competition.
D)   tell government which industries need to be subsidized.E) A) and B)
F) A) and C)

Question 9

Of the following countries, which one best exhibits the characteristics of a market economy?

Accepted Answer

A)   Canada
B)   Cuba
C)   North Korea
D)   BelarusE) A) and B)
F) A) and C)

Question 10

By freedom of enterprise, we mean that individual

Accepted Answer

A)   workers are free to look for jobs and work in whichever ﬁrm will hire them.
B)   ﬁrms are free to employ resources, to produce output, and to sell products.
C)   producers are free to produce whatever the government decides is needed by the society.
D)   consumers are free to buy whatever products will satisfy their needs the most.E) A) and C)
F) B) and C)

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) All of the above
F) None of the above

Question 12

Which of the following does not foster innovation and technological advance?

Accepted Answer

A)   competition in markets
B)   freedom of choice and enterprise
C)   self-interest and personal rewards
D)   fear and avoidance of riskE) C) and D)
F) B) and D)

Question 13

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)   resource; product
C)   product; resource
D)   capital; productE) A) and C)
F) A) and B)

Question 14

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

Exam 2: The Market System and the Circular Flow

Economic systems differ according to which two main characteristics?

Correct Answer
verified

Innovation lagged in the centrally planned economies because

Correct Answer
verified

In terms of the circular ﬂow diagram, businesses obtain revenue through the _ market and make expenditures in the _ market.

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

Most market economies, such as the U.S. and the U.K., allow government policies and actions aimed at promoting economic growth and stability.

Correct Answer
verified

Of the following countries, which one best exhibits the characteristics of a market economy?

Correct Answer
verified

By freedom of enterprise, we mean that individual

Correct Answer
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Which of the following does not foster innovation and technological advance?

Correct Answer
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A characteristic of the market system is

Correct Answer
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The competitive market system

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

Correct Answer
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The economic function of proﬁts and losses is to

Correct Answer
verified

Which of the following is a characteristic of a sole proprietorship?

Correct Answer
verified

Refer to the provided ﬁgure. If box A represents households, D the resource market, and C businesses, then ﬂow (8) would represent _, while ﬂow (7) would represent _.

Correct Answer
verified

Exam 2: The Market System and the Circular Flow

Economic systems differ according to which two main characteristics?

Correct AnswerverifiedShow Answer

Innovation lagged in the centrally planned economies because

Correct AnswerverifiedShow Answer

In terms of the circular ﬂow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.

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

Most market economies, such as the U.S. and the U.K., allow government policies and actions aimed at promoting economic growth and stability.

Correct AnswerverifiedShow Answer

Of the following countries, which one best exhibits the characteristics of a market economy?

Correct AnswerverifiedShow Answer

By freedom of enterprise, we mean that individual

Correct AnswerverifiedShow Answer

Which of the following does not foster innovation and technological advance?

Correct AnswerverifiedShow Answer

A characteristic of the market system is

Correct AnswerverifiedShow Answer

The competitive market system

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The economic function of proﬁts and losses is to

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a sole proprietorship?

Correct AnswerverifiedShow Answer

Refer to the provided ﬁgure. If box A represents households, D the resource market, and C businesses, then ﬂow (8) would represent ___, while ﬂow (7) would represent ___.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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In terms of the circular ﬂow diagram, businesses obtain revenue through the _ market and make expenditures in the _ market.

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Refer to the provided ﬁgure. If box A represents households, D the resource market, and C businesses, then ﬂow (8) would represent _, while ﬂow (7) would represent _.

Correct Answer
verified