Chapter 02 – The Market System and the Circular Flow
1. Which of the following is a distinguishing feature of a command system?
2. Which of the following is a distinguishing feature of a market system?
Chapter 02 – The Market System and the Circular Flow
3. Examples of command economies are:
4. Of the following countries, which one best exhibits the characteristics of a market
economy?
5. The French term “laissez-faire” means:
Chapter 02 – The Market System and the Circular Flow
6. An economic system:
7. The term laissez-faire suggests that:
8. Economic systems differ according to which two main characteristics?
Chapter 02 – The Market System and the Circular Flow
9. Command systems are also known as:
10. A fundamental difference between the command system and the market system is that, in
command systems:
11. Which of the following is not a characteristic of the market system?
Chapter 02 – The Market System and the Circular Flow
12. Which of the following is a fundamental characteristic of the market system?
13. Property rights are important because they:
14. Private property:
Chapter 02 – The Market System and the Circular Flow
15. Copyrights and trademarks are examples of:
16. The regulatory mechanism of the market system is:
17. Broadly defined, competition involves:
Chapter 02 – The Market System and the Circular Flow
18. Competition means that:
19. The division of labor means that:
20. Specialization in production is important primarily because it:
Chapter 02 – The Market System and the Circular Flow
21. Specialization-the division of labor-enhances productivity and efficiency by:
22. Specialization in production is economically beneficial primarily because it:
Chapter 02 – The Market System and the Circular Flow
23. On the basis of the above information it can be said that:
24. On the basis of the above information and assuming trade occurs between the three states
we can expect:
25. Given the above information and assuming trade occurs between the three states we can
expect:
Chapter 02 – The Market System and the Circular Flow
26. Barter:
27. The “coincidence of wants” problem associated with barter refers to the fact that:
28. The use of money contributes to economic efficiency because:
Chapter 02 – The Market System and the Circular Flow
29. The presence of market failures implies that:
30. Which of the following characteristics is least unique to a market system?
31. Which of the following is one of the Five Fundamental Questions?
Chapter 02 – The Market System and the Circular Flow
32. If competitive industry Z is making substantial economic profit, output will:
33. From society’s point of view the economic function of profits and losses is to:
34. In a market economy a significant change in consumers’ desire for product X will:
Chapter 02 – The Market System and the Circular Flow
35. Economic profits in an industry suggest the industry:
36. Economic profits and losses:
37. If consumer desire for product X increases, all of the following will occur except:
Chapter 02 – The Market System and the Circular Flow
38. An increase in consumer desire for strawberries is most likely to:
39. If competitive industry Y is incurring substantial losses, output will:
40. The economic function of profits and losses is to:
Chapter 02 – The Market System and the Circular Flow
41. If a competitive industry is neither expanding nor contracting, we would expect:
42. The competitive market system:
43. In a market economy the distribution of output will be determined primarily by:
Chapter 02 – The Market System and the Circular Flow
2-16
44. The most efficient combination of resources in producing a given output is the
combination that:
45. Firms are motivated to minimize production costs because:
Answer the question using the following data which show all available techniques for
producing 20 units of a particular commodity:
Chapter 02 – The Market System and the Circular Flow
46. Refer to the above data. In view of the indicated resource prices, the economically most
efficient production technique(s) is (are) technique(s):
47. Refer to the above data. Assuming that the firm is motivated by self-interest and that the
20 units which can be produced with each technique can be sold for $2 per unit, the firm will:
48. Refer to the above data. If a new production technique is developed that enables a firm to
produce 20 units of output with 3 units of land, 3 of labor, 1 of capital, and 2 of
entrepreneurial ability, this technique would:
Chapter 02 – The Market System and the Circular Flow
Answer the question on the basis of the following information: Suppose 30 units of product
A can be produced by employing just labor and capital in the four ways shown below.
Assume the prices of labor and capital are $2 and $3 respectively.
49. Refer to the above information. Which technique is economically most efficient in
producing A?
50. Refer to the above information. If the price of product A is $0.50, the firm will realize:
Chapter 02 – The Market System and the Circular Flow
51. In a competitive market economy firms select the least-cost production technique
because:
52. The market system’s answer to the fundamental question “What will be produced?” is
essentially:
53. The market system’s answer to the fundamental question “How will the goods and
services be produced?” is essentially:
Chapter 02 – The Market System and the Circular Flow
54. The market system’s answer to the fundamental question “Who will get the goods and
services?” is essentially:
55. The market system’s answer to the fundamental question “How will the system
accommodate change?” is essentially:
56. The market system’s answer to the fundamental question “How will the system promote
progress?” is essentially: