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188.
The distribution of income in a market system is a primary factor that resolves
which of the following fundamental economic questions?
A.
What will be produced?
189.
In a market economy, the incomes of consumers depend primarily upon
A.
government policies in setting wages and interest rates.
190.
If economic profits in a particular industry increase, then we would expect
A.
resources to be diverted away from that industry.
191.
In a market system, resources will move away from an industry when
192.
“Creative destruction” in a market system is brought about by
D.
money-based trade.
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193.
An increase in the demand for a product and a reduction in its costs of production
would
A.
decrease the profits of producers.
194.
In a market system, as one industry expands while another contracts, resources will
flow
D.
because resource allocation will have to equalize between the two industries.
195.
The market system communicates changes in market conditions and elicits
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appropriate responses from businesses and resource suppliers through changes in prices.
This is known as the
D.
market determination of prices.
196.
The development of the digital video camera, which replaced film video cameras, is
an example of
A.
roundabout production.
197.
Which of the following does not illustrate the idea of creative destruction?
A.
Digital downloads have shrunk the market for CDs and DVDs.
198.
The idea that the desires of resource suppliers and firms to further their own self-
interest will automatically further the public interest is known as
D.
creative destruction.
199.
Which of the following best describes the “invisible hand” concept?
A.
Ample regulation of business by the government will maximize the public’s best
interests.
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200.
The highly influential book by Adam Smith, who brought up the “invisible hand”
notion, is titled
A.
Freakonomics.
201.
The “invisible hand” concept refers to the
D.
underlying money flows that promote the trading of goods and services.
202.
Businesses seeking higher profits and resource suppliers seeking higher incomes lead
to changes in the allocation of resources among different firms and end up with
A.
consumers at the losing end.
203.
The major virtues of the market system include all of the following, except
D.
it emphasizes the freedom to pursue self-interest.
204.
The market economy is regarded as “efficient” in that
A.
it achieves the lowest rate of unemployment.
205.
One basic problem faced by central planners, but hardly present in a market system,
has to do with
A.
determining the production goals or targets in a factory.
206.
The major “success indicator” for business managers in command economies like
the Soviet Union and China in the past was
D.
morale of workers in a firm.
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207.
A characteristic of centrally planned economies is that
D.
there are many incentives for innovation and hard work.
208.
Which of the following is true of an economy that operates entirely through central
planning?
A.
An individual‘s success in business is based on political savvy rather than economic
profitability.
B.
There is relative ease in matching resource allocation to consumer demand by the
central planners.
C.
Central planners receive market information and coordinate economic activity through
the price mechanism.
D.
The system adapts easily to technological change, because there is a healthy
entrepreneurial spirit.
209.
In a command economy like the old Soviet Union, one is able to improve one’s lot
and get ahead in society largely through
A.
entrepreneurship and risk-taking.
210.
According to economist Donald Boudreaux in the “Last Word” section of the
chapter, what best explains why the market system is not a random, chaotic mess?
A.
There is active cooperation among private property owners and government officials to
correct the excesses of a market economy.
211.
In the circular flow model of the market system, households’ major role is to
A.
buy both products and resources.
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212.
In the circular flow model of the market system, business firms’ major role is to
A.
buy products and resources.
213.
The circular flow model illustrates
A.
the importance of having a central plan for the economy.
214.
The simple circular flow model shows that workers and capital owners offer their
services to firms through the
A.
product markets.
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215.
In the circular flow model, households earn their incomes in the
D.
money markets.
216.
According to the circular flow model, product markets are where
A.
households earn their money incomes.
217.
The money income of households consists of all the following, except
A.
wages.
B.
profits.
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218.
Which of the following would be primarily determined in the resource markets?
A.
the airfares charged by airlines for family vacations
219.
Refer to the provided figure. If box A represents households, B the product market,
and C businesses, and if flow (3) represents revenues, then flow (1) would represent
A.
costs.
220.
Refer to the provided figure. If box A represents households, D the resource
market, and C businesses, then flow (8) would represent , while flow (7) would
represent _.
A.
goods and services; consumption expenditures
221. Refer to the provided figure. If box A represents households, B the product market,
and C businesses, then flow (2) and flow (4) would represent
A. the flow of labor and other resources.
222.
Which of the following is not a major category of business structure?
A.
sole proprietorship