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Chapter 02 - The Market System and the Circular Flow
57. The advent of DVDs has virtually demolished the market for videocassettes. This is an
example of:
58. "Consumer sovereignty" refers to the:
59. The dollar votes of consumers ultimately determine the composition of output and the
allocation of resources in a market economy. This statement best describes the concept of:
Chapter 02 - The Market System and the Circular Flow
60. Which of the following is not one of the five fundamental questions?
61. "Consumer sovereignty" means that:
62. Which of the following best describes the invisible-hand concept?
Chapter 02 - The Market System and the Circular Flow
63. The invisible hand refers to the:
64. The invisible hand concept suggests that:
65. Two major virtues of the market system are that it:
Chapter 02 - The Market System and the Circular Flow
66. The market system:
67. According to the concept of the "invisible hand," if Susie opens and operates a profitable
childcare center, then:
68. The invisible hand promotes society's interests because:
Chapter 02 - The Market System and the Circular Flow
69. The coordination problem in the centrally planned economies refers to the idea that:
70. "Under central planning, some group has to decide how to get the necessary inputs
produced in the right amounts and delivered to the right places at the right time. This is a
nearly impossible task without markets and profits." This quotation best identifies the:
71. "Because the outputs of many industries are the inputs to other industries, the failure of
any single industry to fulfill the output quantities specified in the central plan caused a chain-
reaction of adverse repercussions on production." This quotation best identifies the:
Chapter 02 - The Market System and the Circular Flow
72. The incentive problem under communist central planning refers to the idea that:
73. Suppose that an individual sees a tremendous opportunity to produce and sell a new
product, but dismisses the idea because there is no way to exploit this opportunity for personal
gain. This situation best identifies the:
74. Innovation lagged in the centrally planned economies because:
Chapter 02 - The Market System and the Circular Flow
75. The fact that the major indicator of enterprise success in the Soviet Union and pre-reform
China was the quantity of output implied that:
76. Enterprise managers and workers in the Soviet Union often resisted innovations in
production methods because:
77. If products were in short or surplus supply in the Soviet Union:
Chapter 02 - The Market System and the Circular Flow
78. In what type of business do the owners bear no personal financial responsibility for the
company's debts and obligations?
79. The simple circular flow model shows that:
80. The two basic markets shown by the simple circular flow model are:
Chapter 02 - The Market System and the Circular Flow
81. In the resource market:
82. In the simple circular flow model:
Chapter 02 - The Market System and the Circular Flow
83. Refer to the above diagram. Flow (1) represents:
84. Refer to the above diagram. Flow (2) represents:
85. Refer to the above diagram. Flow (3) represents:
Chapter 02 - The Market System and the Circular Flow
86. Refer to the above diagram. Flow (4) represents:
87. In terms of the circular flow diagram, households make expenditures in the _____ market
and receive income through the _____ market.
88. In terms of the circular flow diagram, businesses obtain revenue through the _____ market
and make expenditures in the _____ market.
Chapter 02 - The Market System and the Circular Flow
89. Households and businesses are:
90. Refer to the above diagram. Arrows (1) and (2) represent:
Chapter 02 - The Market System and the Circular Flow
91. Refer to the above diagram. Arrows (3) and (4) represent:
92. Refer to the above diagram. Arrows (1) and (3) are associated with:
Chapter 02 - The Market System and the Circular Flow
94. (Consider This) In 1975, McDonald's introduced its Egg McMuffin breakfast sandwich,
which remains popular and profitable today. This longevity illustrates the idea of:
95. (Consider This) In 2000, McDonald's introduced its McSalad Shaker, which failed to
catch on with the public and was subsequently dropped from the menu. This failure illustrates
the idea of:
Chapter 02 - The Market System and the Circular Flow
96. (Consider This) Since World War II:
97. (Consider This) North Korea's command economy:
Chapter 02 - The Market System and the Circular Flow
98. (Last Word) According to economist Donald Boudreaux, the world's tens of billions of
individual resources get arranged productively:
99. (Last Word) According to economist Donald Boudreaux:
100. Market economies use capital goods because they improve productive efficiency.
Chapter 02 - The Market System and the Circular Flow
101. Money functions as a medium of exchange by eliminating the need for a coincidence of
wants.
102. Consumer sovereignty means that legislation now protects the rights of consumers to
dispose of their incomes as they see fit.
103. Specialization may expand total output even though the individuals involved may have
identical abilities.
104. The wants of consumers are expressed in the product market with "dollar votes."
Chapter 02 - The Market System and the Circular Flow
105. Costs can be defined as total payments made to workers, land owners, and capital
suppliers less payments to the entrepreneur for organizing and combining the other resources
used to produce a good.
106. Continued losses in an industry will cause some firms to reduce output or eventually
leave the industry.
107. The guiding function of prices tends to keep resources flowing toward their most highly
valued uses.
108. The invisible hand refers to the many indirect controls that the Federal government
imposes in a market system.
Chapter 02 - The Market System and the Circular Flow
109. Central planning in the Soviet Union and pre-reform China emphasized the expansion of
the production of consumer goods to raise the domestic standard of living.
110. Central planning often suffers from a coordination problem and an incentive problem.
