Chapter 02 – The Market System and the Circular Flow
1. The market system is an economic system that:
2. The market system is often also known as:
Chapter 02 – The Market System and the Circular Flow
4. The extensive private ownership of property resources in a market system has the following
implications, except:
5. Which statement best describes the market system?
Chapter 02 – The Market System and the Circular Flow
6. In a command system:
7. Which would not be characteristic of a capitalist economy?
8. A basic characteristic of a command system is that:
Chapter 02 – The Market System and the Circular Flow
9. The economies of Ireland and France are:
10. The economies of North Korea and South Korea are:
11. Laissez-faire capitalism is characterized by:
Chapter 02 – The Market System and the Circular Flow
12. By free enterprise, we mean that:
13. Which of the following statements is correct?
14. In a market system, self-interest is the motivating force that drives the decisions and
actions of the following groups, except:
Chapter 02 – The Market System and the Circular Flow
15. How do workers typically express self-interest?
16. In a market economy, entrepreneurs are most concerned with:
17. Consumers express self-interest when they:
Chapter 02 – The Market System and the Circular Flow
18. Which of the following statements about the right to private ownership is false?
19. Competition is more likely to exist when:
20. Competition denotes a condition where:
Chapter 02 – The Market System and the Circular Flow
21. Which statement is correct?
22. The construction and use of capital goods to aid in the production of consumer goods
23. A characteristic of the market system is:
Chapter 02 – The Market System and the Circular Flow
24. All of the following statements describe a market economy except:
25. The system where workers concentrate on specialized tasks to make a product is referred
to as:
26. How does human specialization contribute to an economy’s output?
Chapter 02 – The Market System and the Circular Flow
27. Which of the following is not a reason why specialization and trade are beneficial to
society?
28. A required element of specialization is:
29. Which is an example of barter?
Chapter 02 – The Market System and the Circular Flow
31. Which of the following is necessary to make a trade in a barter economy?
32. Consider a barter system where you have pens, but you want pencils. To satisfy your want
there must be:
Chapter 02 – The Market System and the Circular Flow
33. The use of money for exchange:
34. Anything that is generally acceptable in trading for goods and services is a:
35. Which is the main problem with the barter system of exchange?
Chapter 02 – The Market System and the Circular Flow
36. International specialization and trade:
37. Why might a company use barter rather than money to make a transaction?
38. Which is assumed to be most limited in scope under a market system?
Chapter 02 – The Market System and the Circular Flow
39. If a nation restricts trade with other nations, then the most likely effect is:
40. Which is one of the five fundamental questions that need to be dealt with in any economic
system?
41. All economic systems must answer certain fundamental economic questions. Which is not
one of these questions?
Chapter 02 – The Market System and the Circular Flow
42. Which is not one of the five fundamental questions that an economy must deal with?
43. Consumer sovereignty and “dollar votes” guide the market system in dealing with which
fundamental question?
44. The term consumer sovereignty means that:
Chapter 02 – The Market System and the Circular Flow
45. The market system is said to be characterized by “consumer sovereignty.” This is
because:
46. The term dollar votes in a market system means:
47. Payments that a firm makes to obtain needed resources comprise its:
Chapter 02 – The Market System and the Circular Flow
48. In a market system, which production techniques will be used by firms to produce their
output?
49. If the total costs of producing 1,500 units of output is $15,000 and this output sold to
consumers for $16,500, then the firm would earn profits of:
50. The production technique that is most efficient is the one that produces a given amount of
output:
Chapter 02 – The Market System and the Circular Flow
51. McDonald’s introduced the “Big Mac” in 1968 and it turned out to be a hit, but the “Arch
Deluxe” introduced in 1996 was not. The success or failure of a product in the market system
is determined by:
52. With an increase in profits in a particular industry, we would expect:
53. Firms will tend to leave an industry when:
Chapter 02 – The Market System and the Circular Flow
54. Within a market economy, some industries may be declining while other industries may
be expanding. This indicates that:
55. An increase in the demand for a product and a reduction in its costs of production would:
56. Under what circumstances would you expect economic profits to be zero in a particular
industry?
Chapter 02 – The Market System and the Circular Flow
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57. As new firms enter an expanding industry:
58. Economic efficiency is the primary guide in answering which of the fundamental
questions in a market economy?
Suppose a firm can produce 70 units of a hypothetical product, Zenia, by combining labor,
land, capital, and entrepreneurial ability in each of 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.