Question 1

According to the invisible hand doctrine:

Accepted Answer

A)   only laissez-faire capitalism provides the reward of profit.
B)   laissez-faire capitalism is improved when government intervenes in decision making.
C)   the interests of society are best served if producers decide which goods and services buyers should want.
D)   in a system of free and open competition, it is in producers' best interests to provide buyers with what they want, which best serves the interests of society.E) B) and D)
F) C) and D)

Question 2

The transition from a planned to a market-oriented economy:

Accepted Answer

A)   requires that property rights be redefined to allow private ownership.
B)   occurs smoothly and quickly once the decision to make the transition is made.
C)   always leads to political stability as a result of people acting in their own best interests.
D)   all of the above.E) A) and B)
F) A) and C)

Question 3

Failures occur:

Accepted Answer

A)   only in market economies.
B)   only in planned economies.
C)   in both planned and market economies.
D)   in neither planned nor market economies.E) A) and D)
F) None of the above

Question 4

A "price system"is most closely associated with:

Accepted Answer

A)   socialism.
B)   a market economy.
C)   a command economy.
D)   all of the above.E) B) and D)
F) A) and B)

Question 5

An economic system where many of the factors of production are collectively owned and there is an attempt to equalize incomes is:

Accepted Answer

A)   socialism.
B)   capitalism.
C)   absolutism.
D)   mixed capitalism.E) None of the above
F) A) and C)

Question 6

Which of the basic economic decisions always requires a dependence on markets, regardless of the type of system an economy has?

Accepted Answer

A)   How goods and services will be produced.
B)   What goods and services will be produced.
C)   How many goods and services will be produced.
D)   None of the above.E) A) and D)
F) None of the above

Question 7

Which of the following is NOT a basic economic decision that must be made by every society?

Accepted Answer

A)   What goods and services will be produced.
B)   What goods and services consumers will need most.
C)   Who will receive the goods and services that are produced.
D)   What factors of production and methods will be used in producing goods and services.E) B) and C)
F) A) and D)

Question 8

Which of the following occurs in a pure market economy?

Accepted Answer

A)   Businesses are guaranteed a profit.
B)   Government has an important role in the circular flow model.
C)   Households are sellers and businesses are buyers in resource markets.
D)   Collective decision making is valued more highly than individual decision making.E) B) and C)
F) A) and C)

Question 9

In a circular flow model of a market economy, businesses:

Accepted Answer

A)   sell goods to households in output markets.
B)   buy goods from households in output markets.
C)   sell resources to households in output markets.
D)   buy resources from households in output markets.E) All of the above
F) A) and D)

Question 10

A lack of incentives to protect the environment is a weakness of both market economies and planned economies.

Accepted Answer

A) True 
 B)False

Question 11

In a market economy, businesses are free to make their own decisions regarding price, product line, and methods of production, and they operate with a profit motive.

Accepted Answer

A) True 
 B)False

Question 12

Circular flow model.
 
-If line (3)  represents the flow of income, then output markets are shown by:

Accepted Answer

A)   box A.
B)   box B.
C)   box C.
D)   box D.E) B) and C)
F) All of the above

Question 13

After studying the various economic systems, it is clear that:

Accepted Answer

A)   the U.S. has a pure market economy.
B)   an economy based on collective decision making needs markets to function.
C)   the economies of the world can be differentiated from one another by how they mix individual and collective decision making.
D)   all of the above.E) A) and B)
F) A) and C)

Question 14

In a market economy, the types and quantities of goods and services produced are determined by the:

Accepted Answer

A)   central bank.
B)   decisions of millions of households and businesses in the marketplace.
C)   legislative branch.
D)   top 1% of income earners.E) B) and C)
F) A) and D)

Question 15

What is the invisible hand doctrine and what type of economic system does it support?

Accepted Answer

The invisible hand supports market econo...

Question 16

In a planned economy:

Accepted Answer

A)   the wants and needs of everyone in the society can be satisfied.
B)   unemployment is difficult to eliminate because planners prefer using machines, rather than people, in production.
C)   the elapsed time from the beginning of a plan to the time of production can cause products that were once desired to no longer be in demand.
D)   production bottlenecks and stoppages can be eliminated because planners can anticipate all problems and control their effects.E) A) and C)
F) B) and C)

Question 17

A drawback of the market system in dealing with the basic economic questions is:

Accepted Answer

A)   it depersonalizes economic decision-making.
B)   it produces high incomes for people with highly valued skills, and owners of highly valued resources.
C)   it does not protect people with inadequate knowledge about products.
D)   power is always concentrated on the side of businesses and consumers have no influence on business decisions.E) C) and D)
F) B) and D)

Question 18

Which of the following recent developments in the U.S. economy is true?

Accepted Answer

A)   The Employment Act was declared unconstitutional.
B)   The deregulatory trend of the late 1970s and 1980s reversed in the 1990s.
C)   The government has taken over all corporations that produce goods for defense.
D)   The debt of the federal government was eliminated during the George W. Bush administration.E) A) and D)
F) All of the above

Question 19

According to the circular flow model, payments for goods and services flow from:

Accepted Answer

A)   households to businesses in input markets.
B)   businesses to households in input markets.
C)   households to businesses in output markets.
D)   businesses to households in output markets.E) None of the above
F) B) and C)

Question 20

Every country in the world, regardless of its political or economic system, must determine:

Accepted Answer

A)   how goods and services will be produced.
B)   what goods and services will be produced.
C)   who will receive the goods and services that are produced.
D)   all of the above.E) A) and D)
F) A) and C)

Exam 2: Economic Decision Making and Economic Systems

Failures occur:

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According to the invisible hand doctrine:

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In a market economy, the types and quantities of goods and services produced are determined by the:

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A drawback of the market system in dealing with the basic economic questions is:

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In a planned economy:

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An economic system where many of the factors of production are collectively owned and there is an attempt to equalize incomes is:

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A lack of incentives to protect the environment is a weakness of both market economies and planned economies.

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Which of the basic economic decisions always requires a dependence on markets, regardless of the type of system an economy has?

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Which of the following is NOT a basic economic decision that must be made by every society?

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In a market economy, businesses are free to make their own decisions regarding price, product line, and methods of production, and they operate with a profit motive.

Correct AnswerverifiedShow Answer

The transition from a planned to a market-oriented economy:

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After studying the various economic systems, it is clear that:

Correct AnswerverifiedShow Answer

Every country in the world, regardless of its political or economic system, must determine:

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In a circular flow model of a market economy, businesses:

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Circular flow model. -If line (3) represents the flow of income, then output markets are shown by:

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Which of the following occurs in a pure market economy?

Correct AnswerverifiedShow Answer

Which of the following recent developments in the U.S. economy is true?

Correct AnswerverifiedShow Answer

A "price system"is most closely associated with:

Correct AnswerverifiedShow Answer

According to the circular flow model, payments for goods and services flow from:

Correct AnswerverifiedShow Answer

What is the invisible hand doctrine and what type of economic system does it support?

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The invisible hand supports market econo...
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