question

Which of the following is a distinguishing feature of a command system?

answer

central planning

question

Which of the following is a distinguishing feature of laissez-faire capitalism?

answer

minimal government intervention

question

Example of command economies are:

answer

Cuba and Korea

question

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

answer

North Korea

question

The French term laissez-faire means?

answer

let it be

question

An economic system

answer

is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem

question

The term laissez- faire suggest that:

answer

Government should not interfere with the operation of the economy?

question

economic systems differ according to which two main characteristics?

answer

Who owns the factors an the methods used to used to coordinate economic activity

question

Command systems also are known as

answer

Communism

question

10. A fundamental difference between the command system and laissez-faire capitalism is that, in command systems:

answer

The division of output is decided by central planning rather than by individuals operating freely through markets.

question

Which of the following is not a typical characteristic of a market system?

answer

Government ownership of most property resources.

question

Which of the following is a fundamental characteristic of the market system

answer

Property rights

question

Property rights are important because they

answer

encourage cooperation by improving the chances of mutually agreeable transactions.

question

Private property:

answer

encourages owners to maintain or improve their property so as to preserve or enhance value.

question

Copyrights and trademarks are examples of:

answer

property rights

question

The regulatory mechanism of the market system is:

answer

competition

question

Broadly defined, competition involves:

answer

independently acting buyers and sellers and freedom to enter or leave markets

question

Competition means that:

answer

independently acting buyers and sellers and freedom to enter or leave markets

question

The division of labor means that:

answer

workers specialize in various production tasks.

question

Specialization in production is important primarily because it:

answer

results in greater total output.

question

Specialization—the division of labor—enhances productivity and efficiency by:

answer

1. allowing workers to take advantage of existing differences in their abilities and skills. 2. avoiding the time loss involved in shifting from one production task to another. 3. allowing workers to develop skills by working on one, or a limited number, of tasks. (all the answers)

question

Specialization in production is economically beneficial primarily because it:

answer

Permits the production of a larger output with fixed amounts of resources.

question

Barter

answer

entails the exchange of goods for goods.

question

The "coincidence of wants" problem associated with barter refers to the fact that:

answer

for exchange to occur, each seller must have a product that some buyer wants.

question

The use of money contributes to economic efficiency because:

answer

it promotes specialization by overcoming the problems with barter.

question

The presence of market failures implies that:

answer

there is an active role for government, even in a market system.

question

Which of the following characteristics is least unique to a market system?

answer

The wide spread use of money

question

Which of the following is one of the Five Fundamental Questions?

answer

What goods and services will be produced?

question

In a competitive industry Z is making substantial economic profit, output will:

answer

Expand in industry Z as more resources will move to that industry

question

From society's point of view, the economic function of profits and losses is to:

answer

reallocate resources from less desired to more desired uses.

question

In a market economy a significant change in consumers' desire for product X will:

answer

1.alter the profits or losses received by suppliers of product X. 2. cause a reallocation of scarce resources. 3. cause some industries to expand and others to contract.

question

Economic profits in an industry suggest the industry:

answer

should be larger to better satisfy consumers' desire for the product.

question

Economic profits and losses:

answer

are essential to the reallocation of resources from less desired to more desired goods

question

If consumer desire for product X increases, this will not happen:

answer

a decrease in the quantity of resources employed in industry X.

question

An increase in consumer desire for strawberries is most likely to:

answer

increase the number of strawberry pickers needed by farmers.

question

If competitive industry Y is incurring substantial losses, output will:

answer

contract as resources move away from industry Y.

question

The economic function of profits and losses is to:

answer

signal that resources should be reallocated.

question

If a competitive industry is neither expanding nor contracting, we would expect:

answer

economic profits to be zero.

question

The competitive market system

answer

encourages innovation because successful innovators are rewarded with economic profit

question

In a market economy, the distribution of output will be determined primarily by

answer

The quantities and prices of the resources that households supply.

question

The most efficient combination of resources in producing a given output is the combination that:

answer

minimize the cost per unit of output.

question

Firms are motivated to minimize production cost because:

answer

competitive pressure in the market will drive out higher cost production

question

In a competitive market economy, firms select the least cost production technique because:

answer

to do so will maximize the firms profits

question

The market system's answer to the fundamental question, " What will be produced?"

answer

Goods and services that are profitiable

question

The market system's answer to the fundamental question," How will the goods and services be produced?"

answer

In the way that minimizes the cost per unit of output

question

The market system's answer to the fundamental question, " Who will get the goods and services ?"

answer

Those willing and able to pay for them

question

The market system's answer to the fundamental question, "How will the system accommodate change?"

answer

Through the guiding function of prices and the incentive function of prifits

question

56. The market system's answer to the fundamental question "How will the system promote progress?" is essentially:

answer

Through the profit potential that encourages development of new technology."

question

57. The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:

answer

Creative destruction

question

"Consumer sovereignty" refers to the:

answer

idea that the decisions of producers must ultimately conform to consumer demands.

question

The dollar vote of consumers ultimately determine the composition of output and the allocation of resources in a market economy. The statement best describes the concept or

answer

consumer sovereignty

question

Which of the following is not one of the five fundamental questions?

answer

What price will be charged for goods and services

question

"Consumer sovereignty" means that:

answer

buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

question

Which of the following best describes the invisible-hand concept

answer

The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest

question

The invisible hand refers to the:

answer

notion that, under competition, decisions motivated by self-interest promote the social interest.

question

The invisible hand concept suggests that

answer

assuming competition, private and public interests will coincide.

question

Two major virtues of the market system are that it:

answer

allocates resources efficiently and allows economic freedom.

question

The market system

answer

effectively harnesses the incentives of workers and entrepreneurs.

question

According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then:

answer

she has served society's interests by providing a desired good or service.

question

The invisible hand promotes society's interests because:

answer

individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase.

question

The coordination problem in the centrally planned economies refers to the idea that:

answer

the planners had to direct inputs to each interprise

question

70. "Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the:

answer

coordination problem under central planning.

question

Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfill the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the: A. incentive problem under central planning.

answer

coordination problem under central planning

question

The incentive problem under communist central planning refers to the idea that: A. planners had to direct required inputs to each enterprise.

answer

workers, managers, and entrepreneurs could not personally gain by responding to shortages or . surpluses or by introducing new and improved products.

question

Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no way to exploit this opportunity for personal gain. This situation best identifies the:

answer

incentive problem under communist central planning.

question

Innovation lagged in the centrally planned economies because:

answer

enterprises resisted innovation in fear that their production targets would be raised.

question

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that:

answer

product quality was neglected.

question

Enterprise managers and workers in the Soviet Union often resisted innovations in production methods because:

answer

production targets were often increased when innovation occurred.

question

If products were in short or surplus supply in the Soviet Union:

answer

producers would not react because no price or profit signals occurred.

question

In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?

answer

Cooperation

question

The simple circular flow model shows that:

answer

households are on the selling side of the resource market and on the buying side of the product market.

question

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

answer

product and resources

question

The resource market

answer

households sells resources to business

question

In the simple circular flow model

answer

business are sellers of final products

question

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

answer

Product and resources

question

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

answer

Product and resources

question

Households and businesses are:

answer

sellers in the resource and product markets respectively.

question

Which of the following best illustrates the circular flow model in action?

answer

All of these answers illustrate the workings of the circular flow model.

question

Risk is a problem

answer

in both market system and command systems

question

Which of the following statements is true about risk management in market systems versus command systems?

answer

Market systems manage risk better because entrepreneurs taking risks bear the costs of poor . decisions, where in command systems government decision makers don't bear those costs.

question

Risk management is command economies

answer

Tends to be done poorly because decision makers are insulates from the risk of making a poor decision

question

In a market system

answer

a firm's employee and suppliers are largely shielded from risk

question

In a market system, employees and suppliers;

answer

are usually shielded from risk, but at the cost not sharing in the profit of the firm

question

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

answer

Firms are better able to attract inputs, as these inputs do not have to share the risk

question

A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?

answer

Firms focus attention on prudent risk management, as it is profitable to manage risk

question

(Consider This) In 1975, McDonald's introduced its Egg McMuffin breakfast sandwich, which remains popular and profitable today. This longevity illustrates the idea of:

answer

consumer sovereignty

question

.(Consider This) In 2000, McDonald's introduced its McSalad Shaker, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of: A. consumer sovereignty.

answer

consumer sovereignty

question

(Consider This) Since World War II:

answer

South Korea's market economy has significantly outperformed North Korea's command economy.

question

(Consider This) North Korea's command economy:

answer

is one of the few remaining command economies.

question

.(Consider This) Which of the following statements about insurance and risk is true?

answer

Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk

question

(Consider This) Martha's Milkshake Company buys earthquake insurance from the Stable Ground

answer

Martha's has a lower tolerance for earthquake risk than Stable Ground.

question

(Last Word) According to economist Donald Bordeaux, the world's tens of billions of individual resources get arranged productively:

answer

because private property encourages people to consider the alternative uses of their resources and select those that provide the most rewards

question

(Last Word) According to economist Donald Bordeaux:

answer

private property eliminates the possibility that resource arrangements will be random.

Microeconomics Chapter 2 student quiz, prof. Biery – Flashcards

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards