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

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 3

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

Question 4

The most efficient combination of resources in producing any output is that combination which:

Accepted Answer

A)   comes closest to using the same quantities of land,labour,capital,and entrepreneurial ability.
B)   can be obtained for the smallest money outlay.
C)   uses the smallest total quantity of all resources.
D)   conserves most on the use of labour.E) A) and C)
F) A) and D)

Question 5

-Refer to the circular flow model of the economy.In the diagram flow (3) represents:

Accepted Answer

A)   wage,rent,interest,and profit income.
B)   land,labour,capital,and entrepreneurial ability.
C)   goods and services.
D)   consumer expenditures.E) All of the above
F) B) and C) C

Question 6

Competition is more likely to exist when:

Accepted Answer

A)   there is free entry into and exit out of industries.
B)   there is a single supplier of all goods and services.
C)   the government purchases most goods and services.
D)   products are produced by a few large firms.E) All of the above
F) C) and D)

Question 7

-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 B)
F) None of the above

Question 8

In the circular flow model:

Accepted Answer

A)   households supply factors of production to firms.
B)   households receive income through the factor market.
C)   households spend income in the product market.
D)   all of the above hold true.E) A) and B)
F) A) and C)

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

Question 10

Property rights do not encourage people to cooperate.

Accepted Answer

A) True 
 B)False

Question 11

If competitive industry Y is incurring substantial losses,we can expect that output will:

Accepted Answer

A)   expand,product price will rise,and losses will tend to disappear.
B)   contract,product price will fall,and losses will increase.
C)   contract,product price will rise,and losses will tend to disappear.
D)   expand,product price will fall,and losses will tend to disappear.E) None of the above
F) A) and B)

Question 12

The most important consequence of property rights is that

Accepted Answer

A)   they facilitate exchange.
B)   allow for freedom of choice.
C)   they encourage people to cooperate by helping to ensure that only mutually agreeable economic transactions take place.
D)   they allow for a division of labour.E) A) and C)
F) A) and B)

Question 13

-Refer to the circular flow model of the economy.In the diagram flow (2) represents:

Accepted Answer

A)   wage,rent,interest,and profit income.
B)   land,labour,capital,and entrepreneurial ability.
C)   goods and services.
D)   consumer expenditures.E) A) and B)
F) A) and C)

Question 14

The "invisible hand" refers to the many indirect controls which the federal government imposes in a system of mixed capitalism.

Accepted Answer

A) True 
 B)False

Question 15

The development of the Internet and e-mail to replace regular mail services in many cases would be an example of:

Accepted Answer

A)   roundabout production.
B)   derived demand.
C)   creative destruction.
D)   specialization.E) None of the above
F) All of the above

Question 16

Specialization in production is economically beneficial primarily because it:

Accepted Answer

A)   allows everyone to have a job which they like.
B)   permits the production of a larger output with fixed amounts of resources.
C)   facilitates trade by bartering.
D)   guarantees full employment.E) A) and C)
F) B) and C)

Question 17

The process in which workers select specialized tasks to make a product is referred to as:

Accepted Answer

A)   a coincidence of wants.
B)   roundabout production.
C)   freedom of choice.
D)   division of labour.E) A) and C)
F) B) and C) D

Question 18

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) None of the above

Question 19

Which of the following is not a part of a market system?

Accepted Answer

A)   private property
B)   freedom of enterprise and choice
C)   competition in product and resource markets
D)   government determination of basic economic goalsE) B) and C)
F) A) and D)

Question 20

-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 D)
F) A) and B)

Exam 2: The Market System and the Circular Flow

Government alters the distribution of income by market intervention,in which case it modifies the prices established by market forces.

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

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

Correct AnswerverifiedB

The most efficient combination of resources in producing any output is that combination which:

Correct AnswerverifiedShow Answer

-Refer to the circular flow model of the economy.In the diagram flow (3) represents:

Correct AnswerverifiedC

Competition is more likely to exist when:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the circular flow model:

Correct AnswerverifiedShow Answer

The division of labour means that:

Correct AnswerverifiedShow Answer

Property rights do not encourage people to cooperate.

Correct AnswerverifiedShow Answer

If competitive industry Y is incurring substantial losses,we can expect that output will:

Correct AnswerverifiedShow Answer

The most important consequence of property rights is that

Correct AnswerverifiedShow Answer

-Refer to the circular flow model of the economy.In the diagram flow (2) represents:

Correct AnswerverifiedShow Answer

The "invisible hand" refers to the many indirect controls which the federal government imposes in a system of mixed capitalism.

Correct AnswerverifiedShow Answer

The development of the Internet and e-mail to replace regular mail services in many cases would be an example of:

Correct AnswerverifiedShow Answer

Specialization in production is economically beneficial primarily because it:

Correct AnswerverifiedShow Answer

The process in which workers select specialized tasks to make a product is referred to as:

Correct AnswerverifiedD

The market system is an economic system that:

Correct AnswerverifiedShow Answer

Which of the following is not a part of a market system?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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B

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C

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D

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