Chapter 2 The Market System and the Circular Flow Flashcards
Refer to the following diagram of a circular flow model of the economy:In the diagram, consumer expenditures are represented by:
A)Flow 1
B)Flow 2
C)Flow 3
D)Flow 4
D) Flow 4
For a laissez-faire system, which of the following best answers the question, “What goods and services will be produced?”
A)Only those goods whose long-term profits are greater than average
B)Any good for which consumers are willing to pay a positive price
C)Any good whose production is characterized by the least-cost technology
D)Any good that returns its producers sufficient revenue to cover its total costs
D) Any good that returns its producers sufficient revenue to cover its total costs
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
B) central planners found it increasingly difficult to coordinate the economic decisions of consumers, resource suppliers, and businesses
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
D) profitable returns to innovative firms
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
C) increases output by enabling workers to take advantage of differences in their skills
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
C) help determine which industries survive or fail
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
A) Profits of peach growers will rise and peach production will rise
The laissez-faire 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
D) private property rights
firm will earn a positive economic profit if:
A)its total sales revenue equals the total cost of labor, capital, raw materials, and entrepreneurship
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 costs
D) its total sales revenue exceeds the sum of all its costs
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.Refer to the table. Which is the most efficient technique for producing the output?
A) A
B B
C )C
D) D
A) A
