Question 1

Which of the following best illustrates the circular flow model in action?

Accepted Answer

A)  Bobbie goes to work and builds cars; she uses the income she receives to buy food at the grocery store.
B)  Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier and uses the rest to take her family out to dinner.
C)  Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers.
D)  All of these answers illustrate the workings of the circular flow model.E) All of the above
F) B) and C)

Question 2

A required element for specialization to lead to an increase in the satisfaction of society's wants is

Accepted Answer

A)  a capitalist economy.
B)  exchange and trade.
C)  the use of money.
D)  a central plan.E) A) and D)
F) A) and C)

Question 3

A market system tends to restrict business risk to owners and investors.This results in which of the following benefits?

Accepted Answer

A)  It encourages more people to become entrepreneurs.
B)  Firms have to pay more to attract inputs, as these inputs have to share the risk.
C)  Firms focus attention on prudent risk management, as it is profitable to manage risk.
D)  Income becomes more equally distributed.E) B) and D)
F) C) and D)

Question 4

The market system is said to be characterized by "consumer sovereignty." This is because

Accepted Answer

A)  a sovereign government determines which consumer goods will be produced.
B)  the prices of consumer goods are regulated by a sovereign government.
C)  firms must match their production decisions to the consumers' choices.
D)  consumer goods are considered to be more important than capital goods.Difficulty: 02 MediumE) None of the above
F) All of the above

Question 5

The highly influential book by Adam Smith, who brought up the "invisible hand" notion, is titled

Accepted Answer

A)  Freakonomics.
B)  The Principles of Economics.
C)  The Age of the Economist.
D)  The Wealth of Nations.Difficulty: 02 MediumE) All of the above
F) A) and D)

Question 6

(Consider This)  Which of the following statements about insurance and risk is true?

Accepted Answer

A)  Insurance inhibits economic growth and investment by discouraging risk-taking.
B)  Insurance transfers risk from those with a high tolerance for risk to those with a low tolerance for risk.
C)  Insurance companies always earn profits because insurance premiums always exceed the payout for insured events.
D)  Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk.E) A) and B)
F) None of the above

Question 7

The money income of households consists of all the following, except

Accepted Answer

A)  wages.
B)  profits.
C)  interest.
D)  revenues.E) C) and D)
F) A) and C)

Exam 2: The Market System and the Circular Flow

A required element for specialization to lead to an increase in the satisfaction of society's wants is

Correct Answer
verified

The money income of households consists of all the following, except

Correct Answer
verified

The market system is said to be characterized by "consumer sovereignty." This is because

Correct Answer
verified

The highly influential book by Adam Smith, who brought up the "invisible hand" notion, is titled

Correct Answer
verified

(Consider This) Which of the following statements about insurance and risk is true?

Correct Answer
verified

Which of the following best illustrates the circular flow model in action?

Correct Answer
verified

A market system tends to restrict business risk to owners and investors.This results in which of the following benefits?

Correct Answer
verified

Exam 2: The Market System and the Circular Flow

A required element for specialization to lead to an increase in the satisfaction of society's wants is

Correct AnswerverifiedShow Answer

The money income of households consists of all the following, except

Correct AnswerverifiedShow Answer

The market system is said to be characterized by "consumer sovereignty." This is because

Correct AnswerverifiedShow Answer

The highly influential book by Adam Smith, who brought up the "invisible hand" notion, is titled

Correct AnswerverifiedShow Answer

(Consider This) Which of the following statements about insurance and risk is true?

Correct AnswerverifiedShow Answer

Which of the following best illustrates the circular flow model in action?

Correct AnswerverifiedShow Answer

A market system tends to restrict business risk to owners and investors.This results in which of the following benefits?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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