Microeconomics ch 2 Quiz – Flashcards
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The market system is an economic system that:
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Gives private individuals the right to own resources used in production
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One major element of the command system is:
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Central planning conducted by the government
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In a command system:
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The government makes production and allocation decisions
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Which of the following would not be emphasized in a capitalist economy?
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Prevention of owners of capital from exposing this resource to risk
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The government may not implement policies intended to redistribute income in which of the following economic systems?
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Laissez-faire capitalism
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Laissez-faire capitalism is characterized by:
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Very limited government role in the economy
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In a market system, self-interest is the motivating force that:
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Coordinates and creates consistency in the operations of various parts of the economy
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Which of the following statements about self-interest in a market system is false?
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Self-interest applies only to capitalists and entrepreneurs, not to workers employed by others
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Competition in a market system denotes a condition where:
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The diffusion of economic power limits its potential abuse
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Which of the following is not a reason why specialization and trade are beneficial to society?
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Firms and workers become less dependent on others for producing goods and services
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A required element for specialization to lead to an increase in the satisfaction of society's wants is:
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Exchange and trade
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Which is an example of barter?
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A person trades a desk for a box of tools
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An economic system in which money is not used is a:
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Barter economy
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The use of money for exchange and trade:
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Fosters more specialization in production
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Suppose a firm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit.- Refer to the above table, and suppose that the firm uses production technique D. If each of the 70 units of Zenia that are produced sells for $1 apiece, then how much will be the profits of the firm from 70 units?
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$13
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The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.- Refer to the above table. At the $3 price for labor the most efficient technique will result in an:
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conomic profit of $l
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"Creative destruction" in a market system is brought about by:
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Entrepreneurship
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In a market system, as one industry expands while another contracts, resources will flow:
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From one industry due to the changes in resource prices paid by firms
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Which of the following does not illustrate the idea of creative destruction?
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A firm has to destroy some of the expired products in its inventory
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The "invisible hand" concept refers to the:
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Guiding function of prices in a market system
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A characteristic of centrally planned economies is that:
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The price is relatively unimportant in allocating resources
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In a command economy like the old Soviet Union, one is able to improve one's lot and get ahead in society largely through:
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Participating in the political hierarchy
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The simple circular flow model shows that workers and capital-owners offer their services to firms through the:
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Resource markets
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Which of the following would be primarily determined in the resource markets?
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The wage rates for computer programmers and engineers
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Refer to the above figure. If box A represents households, B the product market, and C businesses, and if flow (3) represents revenues, then flow (1) would represent:
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Consumption expenditures
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In the circular flow diagram, households get their ability to pay for their consumption expenditures from the:
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Incomes they earn for their resources
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In the circular flow diagram, firms get their ability to pay for the costs of production from the:
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Revenues they receive for their products
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Which of the following guides sensible decisions regarding the management of business risk in a market system?
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The profit and loss system
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In a market system, a firm's employees are typically shielded from business risk by:
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Wage contracts
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In a market system, which of the following is a major benefit of making the firm's owners and investors exclusively shoulder the business risk?
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This allows firms to more easily attract labor and other suppliers of inputs
