Microeconomics ch 2 Quiz

The market system is an economic system that:
Gives private individuals the right to own resources used in production
One major element of the command system is:
Central planning conducted by the government
In a command system:
The government makes production and allocation decisions
Which of the following would not be emphasized in a capitalist economy?
Prevention of owners of capital from exposing this resource to risk
The government may not implement policies intended to redistribute income in which of the following economic systems?
Laissez-faire capitalism
Laissez-faire capitalism is characterized by:
Very limited government role in the economy
In a market system, self-interest is the motivating force that:
Coordinates and creates consistency in the operations of various parts of the economy
Which of the following statements about self-interest in a market system is false?
Self-interest applies only to capitalists and entrepreneurs, not to workers employed by others
Competition in a market system denotes a condition where:
The diffusion of economic power limits its potential abuse
Which of the following is not a reason why specialization and trade are beneficial to society?
Firms and workers become less dependent on others for producing goods and services
A required element for specialization to lead to an increase in the satisfaction of society’s wants is:
Exchange and trade
Which is an example of barter?
A person trades a desk for a box of tools
An economic system in which money is not used is a:
Barter economy
The use of money for exchange and trade:
Fosters more specialization in production
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?
$13
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:
conomic profit of $l
“Creative destruction” in a market system is brought about by:
Entrepreneurship
In a market system, as one industry expands while another contracts, resources will flow:
From one industry due to the changes in resource prices paid by firms
Which of the following does not illustrate the idea of creative destruction?
A firm has to destroy some of the expired products in its inventory
The “invisible hand” concept refers to the:
Guiding function of prices in a market system
A characteristic of centrally planned economies is that:
The price is relatively unimportant in allocating resources
In a command economy like the old Soviet Union, one is able to improve one’s lot and get ahead in society largely through:
Participating in the political hierarchy
The simple circular flow model shows that workers and capital-owners offer their services to firms through the:
Resource markets
Which of the following would be primarily determined in the resource markets?
The wage rates for computer programmers and engineers
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:
Consumption expenditures
In the circular flow diagram, households get their ability to pay for their consumption expenditures from the:
Incomes they earn for their resources
In the circular flow diagram, firms get their ability to pay for the costs of production from the:
Revenues they receive for their products
Which of the following guides sensible decisions regarding the management of business risk in a market system?
The profit and loss system
In a market system, a firm’s employees are typically shielded from business risk by:
Wage contracts
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?
This allows firms to more easily attract labor and other suppliers of inputs