ECON 201
Updated: Aug 15, 2022
Which of the following is a fundamental characteristic of the market system?
property rights
central planning by government
unselfish behavior
government-set wages and prices
AACSB: Knowledge ApplicationAccessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
Property rights are important because they
ensure an equal distribution of income.
B. encourage cooperation by improving the chances of mutuallyagreeable transactions.
guarantee that any exchange will make all parties better off than prior to the exchange.
allow the government to controlhow resources are allocated.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
Private property
discourages cooperation because people don't want to part with what they own.
discourages innovation, as people are often afraid to risk losingtheir own property.
C. encourages owners to maintain or improve their propertyso as to preserveor enhance value.
D. does everythingindicated by the other answers.
AACSB: Knowledge ApplicationAccessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
Copyrights and trademarks are examples of
capital goods.
human capital.
C. property rights.
D. public goods.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
Freedom of enterprise
is a characteristic that is common to most economicsystems.
in a marketsystem means that entrepreneurs can obtain and use economicresources withoutany legal restraint.
C. allows businesses, within broad limits, to choose what goods to produce.
D. refersprimarily to the right of consumers to purchase whatthey want.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
The main mechanism that regulates the market system is
self-interest.
private property.
C. competition.
D. freedom of enterprise and choice.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
Broadly defined, competition involves
private property and freedom of expression.
B. independently acting buyers and sellers and freedom to enter or leave markets.
increasing opportunity costs and diminishing marginalutility.
capital goods and division of labor.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 01 Easy Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
Competition means that
sellers can manipulate market priceby causing productscarcities.
B. there are independently acting buyers and sellers in each market.
a product can be purchased at a number of different prices.
there is more than one seller in a market.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
The division of labor means that
labor markets are geographically segmented.
unskilled workers outnumber skilled workers.
C. workers specialize in variousproduction tasks.
D. each worker performs a large number of tasks.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
Specialization in production is importantprimarily because it
results in greater total output.
allows societytoavoid the coincidence-of-wants problem.
allows society to trade by barter.
allows society to have fewer capital goods.
AACSB: Knowledge ApplicationAccessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
Specialization—the division of labor—enhances productivity and efficiency by
allowing workers to take advantage of existingdifferences in their abilities and skills.
avoiding the time loss involvedin shifting from one productiontask to another.
allowing workers to develop skills by working on one, or a limited number, of tasks.
D. all of the means identified in the other answers.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
Specialization in production is economically beneficial primarily because it
allows everyone to have a job thatheor she likes.
B. permits the production of a larger output with fixed amounts of resources.
facilitates trade by bartering.
guarantees full employment.
AACSB: Knowledge ApplicationAccessibility: Keyboard Navigation
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
24.
On the basis of the information, it can be said that
A. no coincidence of wants exists between any two states.
a coincidence of wants exists between Michigan and Washington.
a coincidence of wants exists between Texas and Washington.
a coincidence of wants existsbetween Michiganand Texas.
AACSB: Knowledge Application
Blooms: Remember Difficulty: 01 Easy
Learning Objective: 02-02 List the main characteristics of the market system.
Test Bank: I Topic: Characteristics of the Market System
25.
The invisible hand promotes society's interests because
individuals pursuing their self-interest will try to produce goods and services that peoplein society want and arewilling to purchase.
individuals will produce goodsfor others out of concern for their fellow human beings.
it makes sure that everyone wins from competition in the market.
government regulation pushes business into producing the right mix of goods and services.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-04 Explain the operation of the invisible hand and why market economies usually do a betterjob than command economies at efficiently transforming economic resources into desirable output.
Test Bank: I Topic: The Invisible Hand
The coordination problem in the centrally planned economiesrefers to the idea that
planners had to direct required inputs to each enterprise.
the price level and the levelof employment were inverselyrelated.
the immediate effect of more investment was less consumption.
exports had to be equal to importsfor a central plan to work.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 02-01 Differentiate between laissez-faire capitalism, the command system, and the marketsystem. Learning Objective: 02-04 Explain the operation of the invisible hand and why marketeconomies usually do a betterjob than command economies at efficiently transforming economic resources into desirable output.
Test Bank: I Topic: EconomicSystems
"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right placesat the right time. This is a nearlyimpossible task without markets and profits." This quotation best identifies the
incentive problem under central planning.
B. coordination problem under central planning.
self-sufficiency dilemma under communism.
resource overcommitment problem under communism.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 03 Hard Learning Objective: 02-01 Differentiate between laissez-faire capitalism, the command system, and the marketsystem.
Learning Objective: 02-04 Explainthe operationof the invisible hand and why market economiesusually do a better job than command economiesatefficiently transforming economic resourcesinto desirable output.
Test Bank: ITopic: Economic Systems
"Because the outputs of many industries are the inputs to other industries, the failure of any single industryto fulfil the output quantitiesspecified in the central plan caused a chain reaction of adverserepercussions on production." This quotation best identifies the
incentive problem under central planning.
self-sufficiency dilemma under communism.
resource overcommitment problem under communism.
D. coordination problem under central planning.
AACSB: Analytical Thinking Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 03 Hard Learning Objective: 02-01 Differentiate between laissez-faire capitalism, the command system, and the marketsystem.
Learning Objective: 02-04 Explainthe operationof the invisible hand and why market economiesusually do a better job than command economiesatefficiently transforming economic resourcesinto desirable output.
Test Bank: ITopic: EconomicSystems
The incentive problem under communist central planning refers to the idea that
planners had to direct required inputs to each enterprise.
B. workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.
the immediate effect of more investment was less consumption.
exports had to be equal to importsfor a central plan to work.
AACSB: Analytical ThinkingAccessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 02-01 Differentiate between laissez-faire capitalism, the command system, and the marketsystem.
Learning Objective: 02-04 Explainthe operationof the invisible hand and why market economiesusually do a better job than command economiesatefficiently transforming economic resourcesinto desirable output.
Test Bank: ITopic: EconomicSystems
Suppose that an individual sees a tremendous opportunity to produceand sell a new productbutdismisses the idea because there is no way to exploit this opportunityforpersonal gain. This situation best identifies the
coordination problem under communistcentral planning.
self-sufficiency dilemma under communism.
asymmetric information problem under communism.
D. incentive problem under communistcentral planning.
Innovation lagged in the centrallyplanned economies because
there was too much domestic business competition.
there was too much competition from foreign firms.
C. enterprises resisted innovation in fear that their production targets would be raised.
D. exports had to equalimports for the plan to work.
AACSB: Analytical ThinkingAccessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 02-01 Differentiate between laissez-faire capitalism, the command system, and the market system. Learning Objective: 02-04 Explain the operation of the invisible hand and why market economies usually do a betterjob than command economies at efficiently transforming economic resources into desirable output.
Test Bank: ITopic: Economic Systems
The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that
product quality was neglected.
production costs were minimized.(错的)
product mix met consumer needs.
technological advance was too rapid.
Enterprise managers and workers in the Soviet Union often resistedinnovations in productionmethods because
production targets were often increased when innovation occurred.
there was a chronic shortage ofcomputers.
workers could not be reallocated geographically.
innovations ordinarily increased dependence on world markets.
AACSB: Analytical ThinkingAccessibility: Keyboard Navigation
Blooms: Analyze Difficulty: 03 Hard
Learning Objective: 02-01 Differentiate between laissez-faire capitalism, the command system, and the market system. Learning Objective: 02-04 Explain the operation of the invisible hand and why market economies usually do a betterjob than command economies at efficiently transforming economic resources into desirable output.
Test Bank: ITopic: EconomicSystems
If products were in short or surplus supply in theSoviet Union,
price and profitsignals eliminated those shortagesand surpluses.
price and profitsignals intensified those shortages and surpluses.
C. producers would not react because no price or profitsignals occurred.
D. the planners would immediately adjust production to achieve equilibrium.
In what type of business do the owners bear no personalfinancial responsibility for the company's debts and obligations?
partnerships
B. corporations
sole proprietorships
in all of the businesses listed in the other answers
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 02 Medium LearningObjective: 02-05 Describe the mechanics of the circularflow model.
Test Bank: I
Topic: The Circular Flow Model
The simple circular flow model shows that
households are on the buying side of both productand resource markets.
businesses are on the sellingside of both product and resourcemarkets.
C. households are on the sellingside of the resource market and on the buying side of the product market.
D. businesses are on the buying side of the product market and on the sellingside of the resource market.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-05 Describethe mechanics of the circularflow model.
Test Bank: I Topic: The Circular Flow Model
The two basic markets shown by the simple circular flow model are
capital goods and consumer goods.
competitive and regulated.
C. product and resource.
D. household and business.
AACSB: Knowledge ApplicationAccessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-05 Describe the mechanics of the circular flow model.
Test Bank: I Topic: The Circular Flow Model
In the resource market,
businesses borrow financial capital from households.
businesses sell services to households.
C. households sell resources to businesses.
D. firms sell raw materials to households.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-05 Describe the mechanics of the circular flow model.
Test Bank: I Topic: The Circular Flow Model
In the simple circular flow model,
households are buyers of resources.
B. businesses are sellers of final products.
households are sellers of final products.
there are real flows of goods, services,and resources, but not money flows.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-05 Describethe mechanics of the circularflow model.
Test Bank: I Topic: The Circular Flow Model
84.
Refer to the diagram. Flow 1represents
A. wage, rent, interest, and profit income.
land, labor, capital, and entrepreneurial ability.
goods and services.
consumer expenditures.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-05 Describe the mechanics of the circular flow model.
Test Bank: I Topic: The Circular Flow Model
85.
Refer to the diagram. Flow 2represents
A. wage, rent, interest, and profitincome.
B. land, labor, capital, and entrepreneurial ability.
goods and services.
consumer expenditures.
86.
Refer to the diagram. Flow 3represents
wage, rent, interest, and profit income.
land, labor, capital, and entrepreneurial ability.
C. goods and services.
D. consumer expenditures.
Flow Model
87.
Refer to the diagram. Flow 4represents
wage, rent, interest, and profit income.
land, labor, capital, and entrepreneurial ability.
goods and services.
D. consumer expendituresand business revenue.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-05 Describethe mechanics of the circularflow model.
Test Bank: I Topic: The Circular Flow Model
In terms of the circularflow diagram, householdsmake expenditures in the market and receive income through the market.
product; financial
resource; product
C. product; resource
D. capital; product
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 02 Medium Learning Objective: 02-05 Describe the mechanics of the circular flow model.
Test Bank: I Topic: The Circular Flow Model
In terms of the circular flow diagram, businesses obtainrevenue through the market and make expenditures in the market.
product; financial
resource; product
C. product; resource
D. capital; product
Households and businesses are
both buyers in the resource market.
both sellers in the productmarket.
C. sellers in the resource and productmarkets respectively.
D. sellers in the productand resource markets respectively.
91.
Refer to the diagram. Arrows (1) and (2) represent
goods and resources, respectively.
money incomes and output, respectively.
output and money incomes, respectively.
D. resources and goods, respectively.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-05 Describe the mechanics of the circular flow model.
Test Bank: I Topic: The Circular Flow Model
92.
Refer to the diagram. Arrows (3) and (4) represent
A. goods and services, respectively.
B. incomes and consumer expenditures, respectively.
resources and goods, respectively.
consumer expenditures and income, respectively.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-05 Describethe mechanics of the circularflow model.
Test Bank: I Topic: The Circular Flow Model
93.
Refer to the diagram. Arrows (1) and (3) are associatedwith
A. the money market.
B. the resource market.
the product market.
international trade.
AACSB: Knowledge Application
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-05 Describethe mechanics of the circularflow model.
Test Bank: I Topic: The Circular Flow Model
Which of the following best illustrates the circularflow model in action?
Bobbie goes to work and builds cars; she uses the income she receives to buy food at the grocery store.
Evan buys a new couch; the owner of the furniturestore uses some of the money from the sale to pay her supplierand uses the rest to take her family out to dinner.
Boeing experiences a surge in orders for new airplanes, promptingthecompany to hire more workers.
D. All of these answers illustrate the workings of the circular flow model.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 02 Medium Learning Objective: 02-05 Describe the mechanics of the circular flow model.
Test Bank: I Topic: The Circular Flow Model
Risk is a problemfaced
only in market systems.
only in command systems.
C. in both market systems andcommand systems.
D. in neither market systems nor command systems, only in laissez-faire capitalism.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-06 Explain how the market system deals with risk.
Test Bank: I Topic: How the Market System Deals with Risk
Which of the followingstatements is true about risk management in market systems versus command systems?
Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, whereas in command systems government decisionmakers don't bear those costs.
Neither system is better than the other in terms of risk management; both systems are equally susceptible to natural disasters and changesin consumer preferences.
Command systems manage risk better because the government controls most economic activity and can thereforeeliminate risk.
Market systems face risk because of the possibility of profits and losses; command systemsdon't face risk because they are not profit driven.
AACSB: Knowledge Application Accessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-06 Explain how the market system deals with risk.
Test Bank: I Topic: How the Market System Deals with Risk
Risk management in command economies
is easy becausethere is no risk.
is easy becausethe government controls most activity and can eliminate risk.
tends to be done poorly becausegovernment officials do not understand risk.
D. tends to be done poorly because decision makers are insulated from the risk of making a poor decision.
AACSB: Knowledge ApplicationAccessibility: Keyboard Navigation
Blooms: Understand Difficulty: 02 Medium
Learning Objective: 02-06 Explain how the marketsystem deals with risk.
Test Bank: I Topic: How the Market System Deals with Risk
In a market system,
firm owners and employees share business risk more orless equally.
B. a firm's employeesand suppliers are largely shielded from risk, relativeto business owners.
employees and suppliers face the greatest risks, because firms can shut down without notice and leave them unpaid.
a firm's owners are largelyshielded from risk because they can walk away from the businessat any time.
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