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Multiple Choice Quiz
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1
Competition is characterized by:
A)freedom of buyers to enter or leave markets
B)a wide variety of prices at which to buy a product
C)sellers manipulating prices by acting in concert with one another
D)buyers manipulating prices by forming "buyers' groups" and cooperatives
2
It is in a firm's best interest to utilize the least-cost production technique because:
A)only this technique is consistent with maximum profits
B)the operation of the "invisible hand" requires it
C)doing so will prevent competition from other firms
D)economic profits will be negative otherwise
3
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
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
The use of capital goods:
A)is often more efficient than more direct production methods
B)leads directly to geographic specialization
C)is the same as the "division of labor"
D)is often required by the wide differences in labor quality
6
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
7
In terms of the circular flow diagram, firms receive revenue in the _____ market and incur costs in the _____ market.
A)product; financial
B)resource; product
C)product; resource
D)capital; resource
8
"Through the guiding function of prices and the incentive function of profits" is the market system's answer to which question?
A)How will society allocate goods and services to consumers?
B)How will the market restrain economic freedom?
C)How will society produce goods and services at lowest cost?
D)How will the system accommodate change?
9
If a change inconsumer 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
10
For a market system, which of the following best answers the question, "What goods and services will be produced?"
A)Only those goods whose long-term economic 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 economic costs





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