Economics (McConnell), 18th Edition

Chapter 2: The Market System and the Circular Flow

Quiz

1
Refer to the following diagram of a circular flow model of the economy:

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In the diagram, consumer expenditures are represented by:
A)Flow 1
B)Flow 2
C)Flow 3
D)Flow 4
2
Which of the following is a capital good?
A)A steel fabrication facility
B)A state highway construction bond
C)A share of Microsoft stock
D)A gallon of milk
3
The command systems of the Soviet Union and eastern Europe failed in part because:
A)previously abundant economic resources became scarce
B)central planners found it increasingly difficult to coordinate the economic decisions of consumers, resource suppliers, and businesses
C)firms manufactured more output than consumers could afford to buy, resulting in a general glut
D)prices were set too low in all markets
4
The competitive market system encourages innovation and technological advance, primarily through:
A)the government's tax code
B)the process of "dollar voting"
C)the guiding function of consumer needs and preferences
D)profitable returns to innovative firms
5
Human specialization, or the division of labor:
A)reduces output by dehumanizing workers
B)reduces output by discouraging workers from learning a wide variety of tasks
C)increases output by enabling workers to take advantage of differences in their skills
D)increases output by allowing workers to each perform a wide variety of tasks
6
Economic profits and losses:
A)answer the question "Who will get the output?"
B)answer the question "How will the goods and services be produced?"
C)help determine which industries survive or fail
D)are the expected outcomes of a decrease in dollar votes and an increase in dollar votes, respectively
7
If a change in consumer preferences results in many more consumers registering their "dollar votes" in favor of peaches, which of the following will most likely follow?
A)Profits of peach growers will rise and peach production will rise
B)Profits of peach growers will rise and peach production will fall
C)Profits of peach growers will fall and peach production will rise
D)Profits of peach growers will fall and peach production will fall
8
The market system is characterized by:
A)widespread use of government price controls
B)centralized decision-making
C)limited use of capital goods
D)private property rights
9
A firm will earn an economic profit if:
A)its total sales revenue equals the cost of labor and raw materials
B)it produces its output utilizing the least-cost production method
C)it is regulated by government
D)its total sales revenue exceeds the sum of all its economic costs
10
A firm can produce a single unit of output by combining labor and capital in any of the combinations shown in the following table. Labor costs $2 per unit and capital costs $4 per unit.

 

Technique

 

A

B

C

D

Labor

10

8

6

9

Capital

6

8

10

7

Refer to the table. Which is the most efficient technique for producing the output?
A)A
B)B
C)C
D)D
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