Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
2-61
Topic:
Characteristics of the Market System
142.
Which of the following statements about markets and prices is correct?
A.
In a market system, buyers and sellers must be in face-to-face contact with each
other.
143.
In a capitalist system, the decisions and actions of millions of consumers and firms
are highly coordinated by
A.
the state and government.
144.
All of the following statements describe a market economy except
D.
the actions of buyers and sellers establish a product's price.
2-62
145.
A characteristic of the market system is
A.
extensive use of direct or manual methods of production.
146.
Which of the following does not foster innovation and technological advance?
147.
The Heritage Foundation in 2015 ranked which of the following economies to
have the highest economic freedom?
A.
the United States
B.
Germany
2-63
148.
A production system where various workers concentrate on different specialized
tasks to contribute toward a whole product is referred to as
A.
a coincidence of wants.
149.
How does human specialization contribute toward increasing an economy's output?
D.
It encourages people to be "jacks-of-all-trades."
150.
With specialization in a market economy, individual
A.
firms produce a wide range of products.
151.
Which of the following is not a reason why specialization and trade are beneficial to
society?
A.
The total output of economic goods may be increased even without any increase in
resources.
152.
A required element for specialization to lead to an increase in the satisfaction of
society's wants is
A.
a capitalist economy.
153.
Specialization is beneficial
A.
at the individual firm level, but not at the national and international levels.
154.
Which is an example of barter?
D.
the purchase of stock on the New York Stock Exchange
155.
An economic system in which money is not used as a medium of exchange is a
A.
planned economy.
2-66
156.
Which of the following is necessary to make a trade in a barter economy?
A.
money
B.
unlimited wants
157.
The use of money for exchange and trade
A.
increases the importance of barter.
158.
Anything that is generally acceptable in trading for goods and services is a
D.
resource.
2-67
159.
Which of the following is the main problem with the barter system of exchange?
A.
It encourages self-interest.
B.
It fosters the division of labor.
160.
International specialization and trade
D.
requires active government regulation.
161.
Why might a company use barter rather than money to make a trade?
A.
Barter trade is generally more efficient than money-based trade.
2-68
162.
Which of the following is assumed to be most limited in scope under a market
system?
A.
entrepreneurship
163.
If a nation restricts trade with other nations, then the most likely effect is
A.
lower prices of goods and services in the nation.
164.
Which is one of the five fundamental questions that need to be dealt with in any
2-69
economic system?
A.
What makes the rate of unemployment low?
165.
Which of the following is not one of the five fundamental questions that an
economy must deal with?
A.
How will the goods and services be produced?
166.
Consumer sovereignty and "dollar votes" guide the market system in dealing with
which fundamental economic question?
D.
Who is to receive the output?
2-70
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c cess i b i l i ty :
Keyboard Navigation
Blooms: Understand
Di ff icult y: 02 Medium
Learning Objective: 02-03 Explain how the market system answers the five
fundamental questions of what to produce, how to produce, who obtains the output,
how to adjust to change, and how to promote progress.
Test Bank: II
Topic: Five Fundamental Questions
167.
The term consumer sovereignty means that
A.
government is responsible for protecting consumers' interests.
168.
The market system is said to be characterized by "consumer sovereignty." This is
because
A.
a sovereign government determines which consumer goods will be produced.
2-71
169.
The term dollar votes in a market system means
A.
inflation will occur if consumers don't spend wisely.
170.
In a market system, the "What will be produced?" question is ultimately decided by
D.
industry analysts.
171.
Payments that a firm makes to obtain needed resources comprise its
D.
revenues.
172.
In a market system, more resources will move toward an industry and expand its
production if the industry has
A.
positive revenues.
173.
In a market system, if firms in an industry persistently earn total revenues that are
less than total costs, then that industry will
D.
get government protection from failure.
2-73
174.
In a market system, which of the following will eliminate high-cost producers and
allow only the low-cost producers to survive?
D.
specialization
175.
If the total costs of producing 1,500 units of output is $15,000 and this output sold
to consumers for a total of $16,500, then the firm would earn profits of
176.
The production technique that is most efficient is the one that produces a given
amount of output
A.
using the least amount of labor resources.
177.
McDonald's introduced the Big Mac in 1968, and it turned out to be a hit.
However, the Arch Deluxe, introduced in 1996, was not. The success or failure of a
product in the market system is determined by
178.
Economic efficiency is the primary guide in answering which of the fundamental
questions in a market economy?
2-75
179. 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.
Techniques
A
B
C
D
Labor
4
10
6
5
Land
5
3
3
3
Capital
5
2
4
4
Entrepreneurship
1
1
1
1
Refer to the provided table. Which technique is the most economically efficient way of
producing Zenia?
A.
A
180. 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.
2-76
Techniques
A
B
C
D
Labor
4
10
6
5
Land
5
3
3
3
Capital
5
2
4
4
Entrepreneurship
1
1
1
1
Refer to the provided 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 total profits of the firm from 70 units of Zenia?
A. $70
181.
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.
Techniques
A
B
C
D
Labor
4
10
6
5
Land
5
3
3
3
Capital
5
2
4
4
Entrepreneurship
1
1
1
1
Refer to the provided table. If the price of labor declines from $3 to $2 per unit, then
what is the least costly way of producing Zenias?
A. A
182. The following table illustrates alternative production techniques for producing 18
widgets that can be sold for $1 each, for a total revenue of $18.
Resource
Price Per Unit of
resource
Techniques
(# of Units of Each
resource
Required)
A
B
C
D
Labor
$2
3
2
1
2
Land
1
2
1
3
1
Capital
4
1
2
2
3
Entrepreneurshi
p
3
1
2
1
1
Based on the data given in the table, the most economically efficient production
technique is
D.
D.
2-78
183. The following table illustrates alternative production techniques for producing 18
widgets that can be sold for $1 each for a total revenue of $18.
Resource
Price Per Unit of
resource
Techniques
(# of Units of Each
resource
Required)
A
B
C
D
Labor
$2
3
2
1
2
Land
1
2
1
3
1
Capital
4
1
2
2
3
Entrepreneurship
3
1
2
1
1
Using technique A will result in an
A.
economic loss of $2.
184. The following table illustrates alternative production techniques for producing 18
widgets that can be sold for $1 each for a total revenue of $18.
Resource
Price Per Unit of
resource
Techniques
(# of Units of Each
resource
Required)
2-79
A
B
C
D
Labor
$2
3
2
1
2
Land
1
2
1
3
1
Capital
4
1
2
2
3
Entrepreneurship
3
1
2
1
1
If the price per unit of labor were to increase from $2 to $3, the most efficient production
technique would then be
A.
A.
185.
The following table illustrates alternative production techniques for producing 18
widgets that can be sold for $1 each for a total revenue of $18.
Resource
Price Per Unit of
resource
Techniques
(# of Units of Each
resource
Required)
A
B
C
D
Labor
$2
3
2
1
2
Land
1
2
1
3
1
Capital
4
1
2
2
3
Entrepreneurship
3
1
2
1
1
If the price of labor increases from $2 to $3, then the results of using Technique C will
change from an economic
C.
profit of $1 to a profit of $2.
186.
In a market system, the distribution of goods and services among consumers is
largely determined by
D.
a random factor that is almost impossible to predict.
187.
"For whom is a given mix of goods and services to be produced? How, in other
words, are the society's outputs to be distributed among its members?" In a market
economy, this question is resolved primarily in the
A.
public sector through the mechanism of central planning.
