Question 1

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

Question 2

Suppose industry A is realizing substantial economic profits.Which of the following best describes the adjustment process which would bring about a new equilibrium?

Accepted Answer

A)  Firms will leave the industry, output will fall, and product price will rise.
B)  Firms will enter the industry, output will rise, and product price will rise.
C)  Firms will leave the industry, output will rise, and product price will fall.
D)  Firms will enter the industry, output will rise, and product price will fall.E) B) and C)
F) A) and C)

Question 3

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

Question 4

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) None of the above
F) All of the above

Question 5

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) A) and B)
F) None of the above

Question 6

Which of the following economic systems are polar opposites of each other?

Accepted Answer

A)  The market system and laissez-faire capitalism
B)  The market system and the command system
C)  The command system and laissez-faire capitalism
D)  Mixed market and the market systemE) C) and D)
F) B) and D)

Question 7

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

Question 8

For whom is a given mix of goods and services to be produced? How, in other words, is the product to be distributed among people when such commodities and services are available? In a market economy, this problem is resolved primarily in the:

Accepted Answer

A)  public sector through the mechanism of central planning.
B)  business sector through the mechanism of advertising.
C)  private sector through the earning and spending of income.
D)  money market through borrowing and saving by households and businesses.E) B) and C)
F) B) and D)

Question 9

A division of labour enhances society's output by permitting people to take advantage of existing differences in their abilities and skills.

Accepted Answer

A) True 
 B)False

Question 10

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

Question 11

The command system is also known as:

Accepted Answer

A)  the market system.
B)  pure capitalism.
C)  market socialism.
D)  socialism or communism.E) A) and B)
F) All of the above

Question 12

In the circular flow diagram, revenues and goods and services flow:

Accepted Answer

A)  in opposite directions but are on the same side of the diagram.
B)  in the same direction but are on the same side of the diagram.
C)  in either direction as they are not correlated.
D)  in opposite directions and are on opposite sides of the diagram.E) B) and D)
F) A) and D)

Question 13

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

Question 14

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 C)
F) A) and D)

Question 15

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

Question 16

Refer to the figure.If box B represents the factor market and flow (3)  represents money income, then:

Accepted Answer

A)  box A is the product market and box C is households.
B)  box C is the product market and box A is households.
C)  box D is the product market and box C is households.
D)  box C is the product market and box D is households.E) None of the above
F) A) and B)

Question 17

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) None of the above
F) C) and D)

Question 18

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

Question 19

Which of the following best describes the "guiding function" of competitive prices?

Accepted Answer

A)  Profitable industries tend to contract and unprofitable industries tend to expand.
B)  The market system will always generate economic profits for firms which use the least costly production technology.
C)  The market system can negotiate reallocations of resources which are appropriate to changes in consumer tastes, technology, and resource supplies.
D)  When prices are in equilibrium, product shortages or surpluses cannot occur.E) None of the above
F) A) and B)

Question 20

Specialization and trade are beneficial to society because:

Accepted Answer

A)  the output of economic goods may be increased with no increase in resources.
B)  scarce resources are utilized more efficiently.
C)  a division of labour lowers prices for products.
D)  all of the above are correct.E) B) and D)
F) A) and B)

Exam 2: B: The Market System and the Circular Flow

Suppose industry A is realizing substantial economic profits.Which of the following best describes the adjustment process which would bring about a new equilibrium?

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

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

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The division of labour means that:

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

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A division of labour enhances society's output by permitting people to take advantage of existing differences in their abilities and skills.

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A characteristic of the market system is:

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

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The command system is also known as:

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Specialization and trade are beneficial to society because:

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Refer to the figure.If box B represents the factor market and flow (3) represents money income, then:

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For whom is a given mix of goods and services to be produced? How, in other words, is the product to be distributed among people when such commodities and services are available? In a market economy, this problem is resolved primarily in the:

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

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

Correct AnswerverifiedShow Answer

The market system is an economic system that:

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In the circular flow diagram, revenues and goods and services flow:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following best describes the "guiding function" of competitive prices?

Correct AnswerverifiedShow Answer

Which is characteristic of the capitalistic ideology?

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Which of the following economic systems are polar opposites of each other?

Correct AnswerverifiedShow Answer

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

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

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