Question 1

Which of the following is a distinguishing feature of a command system?
A)private ownership of all capital
B)central planning
C)heavy reliance on markets
D)widespread dispersion of economic power

Accepted Answer

A distinguishing feature of a command system is central planning. In a command system, the government controls most or all economic activities and makes decisions about what goods and services will be produced, how they will be produced, and how they will be distributed. Private ownership of capital, reliance on markets, and dispersion of economic power are features of market systems.

Question 2

If the total costs of producing 1,500 units of output is $12,000 and this output sold to consumers for a total of $15,000, then the firm would earn economic profits of
A)$15,000.
B)$18,000.
C)$3,000.
D)$12,000.
E)$27,000.

Accepted Answer

Economic profits are calculated by subtracting total costs from total revenue. Here, total revenue is $15,000 (from sales) and total costs are $12,000, so the economic profits are $15,000 - $12,000 = $3,000.

Question 3

Of the following countries, which one best exhibits the characteristics of a market economy?
A)Canada
B)Cuba
C)North Korea
D)Belarus

Accepted Answer

Canada is a country with a predominantly market-oriented economy, characterized by free trade, entrepreneurship, competition, and private ownership of property. The government only intervenes in specific areas such as public services, social welfare, and the regulation of the financial sector. Cuba, North Korea, and Belarus are socialist countries with state-planned economies, in which the government controls almost all aspects of economic activity, and private property is limited.

Question 4

Which of the following is not a typical characteristic of a market system?
A)freedom of choice
B)competition in product and resource markets
C)consumer sovereignty
D)lack of incentives to produce new products
E)profit as a success indicator

Accepted Answer

Lack of incentives to produce new products is not a characteristic of a market system. In contrast, market systems typically encourage innovation and the development of new products through the profit motive and competitive pressures.

Question 5

Low-cost production is not important for Bitcoin miners since Bitcoin is intangible and exists only in cyberspace.

Accepted Answer

Low-cost production is important for Bitcoin miners because it allows them to maximize their profits. Bitcoin is intangible and exists only in cyberspace, but it still has a real-world value that can be converted into fiat currency. Miners who can produce Bitcoin at a lower cost will be able to sell it for a higher profit.

Question 6

South Korea has always been more prosperous than North Korea, even before 1953.

Accepted Answer

Before the Korean War (1950-1953), the North was more industrialized and prosperous due to its concentration of natural resources and heavy industry, while the South was primarily agricultural. The economic divergence favoring the South over the North accelerated significantly after the war, especially with the South's rapid industrialization and economic development from the 1960s onward.

Question 7

Which of the following is one of the Five Fundamental Questions?
A)Which products should be subsidized?
B)How will the goods and services be produced?
C)How much should society save?
D)Which products should be taxed?

Accepted Answer

The question "How will the goods and services be produced?" is one of the Five Fundamental Questions of economics, which addresses the methods and resources used in the production process.

Question 8

Examples of command economies are
A)the United States and Japan.
B)Sweden and Norway.
C)Mexico and Brazil.
D)Cuba and North Korea.

Accepted Answer

Cuba and North Korea are examples of command economies, where the government controls all economic decisions and resources.

Question 9

Which of the following is a characteristic of a corporation?
A)It is an independent legal entity on its own.
B)The owners bear all the responsibility of the business's debts.
C)It is owned and managed by one person.
D)The 2 owners pool their business talents to run the business.

Accepted Answer

Corporations are considered independent legal entities, separate from their owners, which means they can own property, enter into contracts, and be sued in their own name.

Question 10

Government bailouts of failing businesses, like banks during the 2008 financial crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions in dealing with business risk.

Accepted Answer

Government bailouts can create moral hazard, where businesses take on excessive risks believing they will be rescued if things go wrong, thus reducing the incentive to make prudent decisions.

Question 11

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and pass it on to the insurance company.

Accepted Answer

This is the basic principle of insurance. By buying an insurance policy, an individual seeks to transfer the risk of potential financial loss to the insurance company. In exchange for paying premiums, the insurer agrees to cover the cost of certain types of losses or damages as outlined in the policy.

Question 12

Which of the following is a distinguishing feature of laissez-faire capitalism?
A)public ownership of all capital
B)central planning
C)minimal government intervention
D)a circular flow of goods, resources, and money

Accepted Answer

Laissez-faire capitalism is characterized by minimal government intervention in the economy, allowing businesses and markets to operate with little to no government oversight or regulation.

Question 13

Which of the following statements about self-interest in a market system is false?
A)Self-interest applies only to consumers, not to entrepreneurs.
B)Self-interest of entrepreneurs implies seeking maximum profits or minimum losses.
C)Self-interest usually motivates an individual to deliver something of value to others.
D)In a market system, self-interest motivates property owners to try to get the highest rent or price for their property.

Accepted Answer

Self-interest applies to both consumers and entrepreneurs in a market system. Consumers seek to maximize their utility or satisfaction from goods and services, while entrepreneurs aim for maximum profits or minimum losses. This principle drives the market's supply and demand dynamics, benefiting both parties and contributing to the efficient allocation of resources.

Question 14

Private property
A)does everything indicated in the other choices.
B)encourages owners to maintain or improve their property to preserve or enhance value.
C)discourages innovation as people are often afraid to risk losing their own property.
D)discourages cooperation because people don't want to part with what they own.

Accepted Answer

Private property encourages owners to maintain or improve their property to preserve or enhance its value, as they have a vested interest in its worth.

Question 15

Answer the question based on 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 $4 and $3, respectively.  Which technique is economically most efficient in producing A?
A)III
B)II
C)I
D)IV

Accepted Answer

The answer of Answer the question based on the following...

Question 16

Without government subsidized property insurance, people are more likely to be cognizant of the risks of building and living in fire-prone or flood-prone areas because their insurance costs will be higher.

Accepted Answer

Without government-subsidized property insurance, the cost of insurance in high-risk areas reflects the true risk of living there, making people more aware of the dangers and potentially reconsidering their decision to build or live in such areas.

Question 17

College graduates who dislike business risk will mostly seek to be hired by firms as labor, rather than starting their own firms as entrepreneurs.

Accepted Answer

College graduates who dislike business risk tend to prefer the stability and predictability of being employed by firms, avoiding the uncertainties associated with starting and running their own businesses.

Question 18

Having a high fixed salary is what motivates entrepreneurs to make prudent decisions in dealing with business risk.

Accepted Answer

Entrepreneurs are often motivated by factors such as passion, innovation, and the potential for high rewards rather than just a high fixed salary; they typically face and manage risks to achieve greater success and growth in their ventures.

Question 19

Answer the question based on the following information: Suppose 10 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.  If the price of product A is $1.00, and the firm is producing efficiently the firm will realize
A)Economic profit of $10.
B)Economic profit of $23.
C)Economic loss of $13.
D)Economic loss of $3.
E)Economic profit of $3.

Accepted Answer

The answer of Answer the question based on the following...

Question 20

Answer the question based on the following information: Suppose 10 units of product X can be produced by employing just labor and capital in the three ways shown below. Assume the prices of labor and capital are as shown.  Which technique is the most economically efficient?
A)Technique I with total costs of $18
B)Technique I with total costs of $17
C)Technique III with total costs of $13
D)Technique II with total costs of $15

Accepted Answer

The answer of Answer the question based on the following...

Quiz 2: The Market System and the Circular Flow

Which of the following is a distinguishing feature of a command system?

If the total costs of producing 1,500 units of output is $12,000 and this output sold to consumers for a total of $15,000, then the firm would earn economic profits of

Of the following countries, which one best exhibits the characteristics of a market economy?

Which of the following is not a typical characteristic of a market system?

Low-cost production is not important for Bitcoin miners since Bitcoin is intangible and exists only in cyberspace.

South Korea has always been more prosperous than North Korea, even before 1953.

Which of the following is one of the Five Fundamental Questions?

Examples of command economies are

Which of the following is a characteristic of a corporation?

Government bailouts of failing businesses, like banks during the 2008 financial crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions in dealing with business risk.

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and pass it on to the insurance company.

Which of the following is a distinguishing feature of laissez-faire capitalism?

Which of the following statements about self-interest in a market system is false?

Private property

Answer the question based on 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 $4 and $3, respectively. Which technique is economically most efficient in producing A?

Without government subsidized property insurance, people are more likely to be cognizant of the risks of building and living in fire-prone or flood-prone areas because their insurance costs will be higher.

College graduates who dislike business risk will mostly seek to be hired by firms as labor, rather than starting their own firms as entrepreneurs.

Having a high fixed salary is what motivates entrepreneurs to make prudent decisions in dealing with business risk.

Answer the question based on the following information: Suppose 10 units of product X can be produced by employing just labor and capital in the three ways shown below. Assume the prices of labor and capital are as shown. Which technique is the most economically efficient?