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| 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 |
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| 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 |
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| 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 |
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| 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 |
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| 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 |
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| 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 |
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| 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 |
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| 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 |
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| 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 |
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| 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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