Question 1

The development of the digital video camera, which replaced ﬁlm video cameras, is an example of

Accepted Answer

The development of the digital video camera replaced the traditional film video cameras, indicating creative destruction. Creative destruction is a phenomenon whereby new and innovative products or services replace older and outdated ones.

Question 2

"For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this question is resolved primarily
In the

Accepted Answer

In a market economy, the distribution of outputs among members is primarily determined by the earning and spending of income in the private sector. Individuals and firms make choices based on their own self-interest, and prices of goods and services are set through supply and demand in the marketplace.

Question 3

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

Accepted Answer

The distribution of income in a market system determines who will receive the output, or in other words, who gets what is produced. This is why the distribution of income is a primary factor that helps resolve the fundamental economic question of "Who will get the output?"

Question 4

In a market system, as one industry expands while another contracts, resources will ﬂow

Accepted Answer

In a market system, resources will flow across industries, driven by the changes in resource prices paid by firms. As the expanding industry demands more resources, the prices for those resources will increase, incentivizing firms in the contracting industry to switch to the expanding industry, where they can earn higher profits. This movement of resources helps to equalize resource allocation between industries.

Question 5

The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the

Accepted Answer

The guiding function of prices refers to the way in which prices in a market system communicate information about changes in market conditions and elicit appropriate responses from businesses and resource suppliers. As prices rise or fall, businesses and resource suppliers adjust their behavior accordingly in order to maximize their profits. This dynamic process is what keeps markets efficient and responsive to changes in supply and demand.

Question 6

Suppose a ?rm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further
That the ?rm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship
At $9 per unit.
$~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Techniques $
$\begin{array} { | l | c | c | c | c | } 
\hline & A & B & C & D \
\hline \text { Labor } & 4 & 10 & 6 & 5 \
\hline \text { Land } & 5 & 3 & 3 & 3 \
\hline \text { Capital } & 5 & 2 & 4 & 4 \
\hline \text { Entrepreneurship } & 1 & 1 & 1 & 1 \
\hline
\end{array}$ Refer to the provided table. If the price of labor declines from $3 to $2 per unit, then what is the least
Costly way of producing Zenias?

Accepted Answer

With the price of labor declining from $3 to $2 per unit, the cost of each technique needs to be recalculated. Technique B becomes the least costly because it uses the most labor, which is now cheaper.

Question 7

Which of the following does not illustrate the idea of creative destruction?

Accepted Answer

The idea of creative destruction refers to the process of innovation and technological progress leading to the replacement or destruction of older industries or products. Option D does not illustrate this idea, as destroying expired products in inventory is not related to innovation or technological progress.

Question 8

Economic eﬃciency is the primary guide in answering which of the fundamental questions in a market economy?

Accepted Answer

Economic efficiency primarily guides the question of "How will the output be produced?" as it focuses on using the least-cost method of production to maximize resource utilization.

Question 9

In a market system, the distribution of goods and services among consumers is largely determined by

Accepted Answer

In a market system, prices are determined by supply and demand. Consumers who are willing and able to pay the prices set by the market will be the ones who are able to obtain the goods and services. This is because firms will produce goods and services that are in demand and that consumers are willing to pay for, while consumers will purchase the goods and services that they value the most and are able to afford. Therefore, the distribution of goods and services is largely determined by the willingness and ability of consumers to pay for them.

Question 10

In a market system, resources will move away from an industry when

Accepted Answer

Resources will move away from an industry when there is a decrease in demand for the industry's product. This will result in lower revenues and profits for firms in the industry, making it less attractive for resources to be allocated to it.

Question 11

Suppose a ?rm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further
That the ?rm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship
At $9 per unit.
$~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Techniques $
$\begin{array} { | l | c | c | c | c | } 
\hline & A & B & C & D \
\hline \text { Labor } & 4 & 10 & 6 & 5 \
\hline \text { Land } & 5 & 3 & 3 & 3 \
\hline \text { Capital } & 5 & 2 & 4 & 4 \
\hline \text { Entrepreneurship } & 1 & 1 & 1 & 1 \
\hline
\end{array}$ Refer to the provided table, and suppose that the ?rm uses production technique D. If each of the 70
Units of Zenia that are produced sells for $1 apiece, then how much will be the total pro?ts of the ?rm
From 70 units of Zenia?

Accepted Answer

To calculate the total cost of production using technique D, we multiply the quantity of each input by its price: Labor (5 units at $3 each) = $15, Land (3 units at $3 each) = $9, Capital (4 units at $6 each) = $24, Entrepreneurship (1 unit at $9 each) = $9. The total cost = $15 + $9 + $24 + $9 = $57. The revenue from selling 70 units at $1 each = $70. Profit = Revenue - Cost = $70 - $57 = $13.

Question 12

In a market economy, the incomes of consumers depend primarily upon

Accepted Answer

In a market economy, consumer incomes depend primarily on the quantity and prices of resources they possess. This includes factors such as education, skills, experience, and ownership of productive assets like land and capital. Government policies may indirectly influence consumer incomes by affecting the supply and demand of resources, but they do not directly determine individual incomes. Savings may impact an individual's ability to invest in resources, but do not necessarily determine their level of income. Being connected to government and business leaders may provide opportunities for higher-paying jobs or contracts, but it is not a primary determinant of consumer incomes in a market economy.

Question 13

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each, for a total revenue of $18.
 Based on the data given in the table, the most economically eﬃcient production technique is

Accepted Answer

The answer of The following table illustrates alternative production techniques...

Question 14

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.
 If the price of labor increases from $2 to $3, then the results of using Technique C will change from an
Economic

Accepted Answer

The answer of The following table illustrates alternative production techniques...

Question 15

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.
 If the price per unit of labor were to increase from $2 to $3, the most eﬃcient production technique
Would then be

Accepted Answer

The answer of The following table illustrates alternative production techniques...

Question 16

An increase in the demand for a product and a reduction in its costs of production would

Accepted Answer

An increase in demand for a product and a reduction in its cost of production would encourage firms to enter an industry. This is because increased demand means higher sales and increased profits, while reduced production costs lead to higher profit margins. Therefore, new firms would be drawn to the industry as it becomes more profitable, leading to increased competition and potentially lower prices for consumers.

Question 17

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18.
 Using technique A will result in an

Accepted Answer

The answer of The following table illustrates alternative production techniques...

Question 18

If economic proﬁts in a particular industry increase, then we would expect

Accepted Answer

Economic profits are an indication of high demand for goods or services in an industry with limited supply. Firms will want to enter this industry to take advantage of these high profits, thus expanding the industry. This will increase competition and eventually reduce profits, bringing them back down to the level of other industries.

Question 19

Suppose a ?rm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further
That the ?rm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship
At $9 per unit.
$~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Techniques $
$\begin{array} { | l | c | c | c | c | } 
\hline & A & B & C & D \
\hline \text { Labor } & 4 & 10 & 6 & 5 \
\hline \text { Land } & 5 & 3 & 3 & 3 \
\hline \text { Capital } & 5 & 2 & 4 & 4 \
\hline \text { Entrepreneurship } & 1 & 1 & 1 & 1 \
\hline
\end{array}$ Refer to the provided table. Which technique is the most economically e?cient way of producing Zenia?

Accepted Answer

Technique D is the most economically efficient because it has the lowest total cost when considering the prices of labor, land, capital, and entrepreneurship. Calculating the total cost for each technique: A = $72, B = $69, C = $69, D = $66.

Question 20

"Creative destruction" in a market system is brought about by

Accepted Answer

Creative destruction is a process where new businesses and industries replace old and outdated ones. This process is mainly driven by entrepreneurship, where individuals see opportunities for innovation and start new ventures, leading to competition and the eventual decline of established firms that are unable to adapt to these changes. It is not caused by striking workers, government regulation, or money-based trade.

Quiz 2: The Market System and the Circular Flow

The development of the digital video camera, which replaced ﬁlm video cameras, is an example of

"For whom is a given mix of goods and services to be produced? How, in other words, are the society's outputs to be distributed among its members?" In a market economy, this question is resolved primarily In the

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

In a market system, as one industry expands while another contracts, resources will ﬂow

The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the

Which of the following does not illustrate the idea of creative destruction?

Economic eﬃciency is the primary guide in answering which of the fundamental questions in a market economy?

In a market system, the distribution of goods and services among consumers is largely determined by

In a market system, resources will move away from an industry when

In a market economy, the incomes of consumers depend primarily upon

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each, for a total revenue of $18. Based on the data given in the table, the most economically eﬃcient production technique is

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. If the price of labor increases from $2 to $3, then the results of using Technique C will change from an Economic

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. If the price per unit of labor were to increase from $2 to $3, the most eﬃcient production technique Would then be

An increase in the demand for a product and a reduction in its costs of production would

The following table illustrates alternative production techniques for producing 18 widgets that can be sold for $1 each for a total revenue of $18. Using technique A will result in an

If economic proﬁts in a particular industry increase, then we would expect

"Creative destruction" in a market system is brought about by