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Multiple Choice Quiz
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1
Which of the four fundamental questions relates most directly to consumer sovereignty?
A)What goods and services will be produced?
B)How will the goods and services be produced?
C)Who will get the goods and services?
D)How will the system promote progress?
2
The market system is characterized by:
A)widespread use of government price controls.
B)centralized decision making.
C)limited use of "roundabout production."
D)private property rights.
3
The term "consumer sovereignty" means:
A)there are many independently acting consumers in society.
B)firms' choices are constrained by the government through consumer voting blocs.
C)consumer choices ultimately determine which goods and services are produced.
D)consumers have freedom of choice.
4
Which of the following does not distinguish a market system from a command system?
A)The widespread use of money
B)Freedom of enterprise and choice
C)Private property
D)Competition
5
According to Adam Smith, the "invisible hand":
A)represents government control of the economy.
B)promotes individual interests when people act to promote social interests.
C)blocks some resources from being allocated to their best uses.
D)promotes the public interest when people pursue their self-interests.
6
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.
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
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
9
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.
10
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.





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