Question 1

"Consumer sovereignty" refers to the:

Accepted Answer

A)   fact that resource prices tend to be high relative to product prices in capitalistic economies.
B)   idea that the pursuit of self-interest will prove ultimately to be in the public interest.
C)   notion that the decisions of producers and resource suppliers with respect to the kinds and amounts of goods produced must be appropriate to consumer demands.
D)   fact that a federal agency exists to protect consumers from harmful and defective products.

Question 2

In the market system,the statement of "Wages,interest,rent,and profit are crucial determinants of the size of each person's income." is an indication of:

Accepted Answer

A)   What will be produced?
B)   How will the goods and services be produced?
C)   Who will get the output?
D)   How will the system accommodate change?

Question 3

The "invisible hand" refers to the:

Accepted Answer

A)   fact that our 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.

Question 4

In the simple circular flow model businesses are suppliers of final products.

Accepted Answer

A) True 
 B)False

Question 5

The two basic markets shown by the simple circular flow model are:

Accepted Answer

A)   capital goods and consumer goods.
B)   free and controlled.
C)   product and factor.
D)   household and business.

Question 6

-Refer to the circular flow model of the economy.In the diagram flow (1) represents:

Accepted Answer

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

Question 7

The development of MP3 players that significantly reduce the market for CDs and DVDs would be an example of:

Accepted Answer

A)   specialization.
B)   derived demand.
C)   roundabout production.
D)   creative destruction.

Question 8

_____ helps avoid the problems posed by the lack of double coincidence of wants.

Accepted Answer

A)   Barter
B)   Trade
C)   Money
D)   Freedom of choice

Question 9

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.

Question 10

If an increase occurs in the demand for product X,we would expect all of the following to occur except:

Accepted Answer

A)   an increase in the profits of industry X.
B)   an increase in the demand for resources employed by industry X.
C)   an increase in the output of industry X.
D)   a decrease in the prices of resources employed in industry X.

Question 11

Which condition will encourage competition?

Accepted Answer

A)   government licensing requirements in order to enter an industry
B)   a small number of buyers and sellers in a market
C)   the freedom of sellers and buyers to enter or exit an industry
D)   the government serving as the only supplier of goods to consumers

Question 12

The term "mixed economy" refers to an economy:

Accepted Answer

A)   comprised of both product and resource markets.
B)   which engages in both domestic and international trade.
C)   comprised of both extensive private markets and government involvement in the economy.
D)   which functions primarily on the basis of custom and tradition.

Question 13

Competition means that:

Accepted Answer

A)   sellers can cause artificial product scarcities and thereby manipulate market price.
B)   there are large numbers of independently acting buyers and sellers in each market.
C)   a given product can be purchased at a number of different prices.
D)   there is only one seller in a market.

Question 14

In a competitive market economy,firms and resource suppliers will seek to further their own self-interest,but at the same time,as if guided by an "invisible hand," they will promote the public interest.

Accepted Answer

A) True 
 B)False

Question 15

Which is not one of the Five Fundamental Questions?

Accepted Answer

A)   How will the goods and services be produced?
B)   How will the system accommodate change?
C)   Who will get the goods and services?
D)   What goods and services should be produced by government?

Question 16

The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of:

Accepted Answer

A)   a command system.
B)   a market system.
C)   communism.
D)   socialism.

Question 17

The market system communicates changes in supply and demand and elicits appropriate responses from businesses and resource suppliers.This is known as the:

Accepted Answer

A)   rationing function of prices.
B)   guiding function of prices.
C)   monetary function of prices.
D)   circular flow of income.

Question 18

The "invisible hand" concept suggests that:

Accepted Answer

A)   market failures imply the need for a national economic plan.
B)   big businesses are inherently more efficient than small businesses.
C)   the competitiveness of a capitalistic market economy invariably diminishes over time.
D)   given competition,private and public interests will tend to coincide.

Question 19

-On the basis of the information provided it can be said that:

Accepted Answer

A)   no coincidence of wants exists between any two provinces.
B)   a coincidence of wants exists between British Columbia and Ontario.
C)   a coincidence of wants exists between Ontario and Alberta.
D)   a coincidence of wants exists between British Columbia and Alberta.

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.

Exam 2: The Market System and the Circular Flow

The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of:

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Competition means that:

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Which is not one of the Five Fundamental Questions?

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The term "mixed economy" refers to an economy:

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As opposed to the market system,in command economies:

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The two basic markets shown by the simple circular flow model are:

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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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In the simple circular flow model businesses are suppliers of final products.

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-On the basis of the information provided it can be said that:

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If an increase occurs in the demand for product X,we would expect all of the following to occur except:

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In a competitive market economy,firms and resource suppliers will seek to further their own self-interest,but at the same time,as if guided by an "invisible hand," they will promote the public interest.

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-Refer to the circular flow model of the economy.In the diagram flow (1) represents:

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The development of MP3 players that significantly reduce the market for CDs and DVDs would be an example of:

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The "invisible hand" concept suggests that:

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In the market system,the statement of "Wages,interest,rent,and profit are crucial determinants of the size of each person's income." is an indication of:

Correct AnswerverifiedShow Answer

The market system communicates changes in supply and demand and elicits appropriate responses from businesses and resource suppliers.This is known as the:

Correct AnswerverifiedShow Answer

_____ helps avoid the problems posed by the lack of double coincidence of wants.

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The "invisible hand" refers to the:

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Which condition will encourage competition?

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"Consumer sovereignty" refers to the:

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