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c c c c
Chapter 02c
c The Market System and the Circular Flow
c c c c c c
MultiplecChoicecQuestions
1. Thecmarketcsystemciscanceconomiccsystemcthat:
A. Producescmorecconsumercgoodscthanccapitalcgoods
B. Producescmoreccapitalcgoodscthancconsumercgoods
C. Givescprivatecindividualscthecrightctocowncresourcescusedcincproduction
D. Emphasizescthecgovernment'scpowerctoccontrolcmarketscandcdirectceconomiccactivity
2. Thecmarketcsystemciscoftencalsocknowncas:
A. Capitalism
B. Socialism
C. Centralcplanning
D. Regulation
3. Onecelementcofctheccommandcsystemcis:
A. Capitalism
B. Freecmarkets
C. Privatecownership
D. Centralcplanning
4. Thecextensivecprivatecownershipcofcpropertycresourcescincacmarketcsystemchascthecfollowingci
mplications,cexcept:
A. Thecmarketcsystemciscalsocknowncasccapitalism
B. Tradescthatctakecplacecincacmarketcsystemcarecmutually-agreeablectransactions
C. Investment,cinnovation,candcmaintenancecofcpropertycarecfosteredcbycthecmarketcsystem
D. Thecstrongcincthecsocietyccouldcaccumulatecpropertycbycoverpoweringcthecweak
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c c c c
5. Whichcstatementcbestcdescribescthecmarketcsystem?
A. Entrepreneurscdirectcproductioncactivities,candcmarketcpricescallocatecgoodscandcservices
B. Governmentcpoliciescdirectcproductioncactivitiescandcallocatecgoodscandcservices
C. Governmentcpoliciescdirectcproductioncactivities,cwhilecmarketcpricescallocatecgoodscandcs
ervices
D. Individualscandcmarketscallcfunctioncsmoothlycundercthecguidancecandcregulationcofcthecg
overnment
6. Incaccommandcsystem:
A. Self-
interestcguidescandccommandscindividualsctocpursuecactionscthatcleadcthemctowardcachieving
ctheircgoals
B. Thecheadcofceachcfamilycdecidescwhatctocdocwithcthecfamily'scresources
C. Thecgovernmentcmakescproductioncandcallocationcdecisions
D. Marketctradersccommandcwhatcoutputscarecproducedcandchowctheycarecallocated
7. Whichcwouldcnotcbeccharacteristiccofcaccapitalistceconomy?
A. Governmentcownershipcofcmostcfactorscofcproduction
B. Competitioncandcunrestrictedcmarkets
C. Relianceconcthecmarketcsystem
D. Freedomcofcenterprisecandcchoice
8. Acbasicccharacteristiccofcaccommandcsystemciscthat:
A. Wagescpaidctoclaborcarechigher
B. Governmentcownscmostceconomiccresources
C. Freecmarketscarecnevercpermittedcincaccommandceconomy
D. Governmentcplannerscplaycaclimitedcrolecincdecidingcwhatcgoodscwillcbecproduced
9. ThececonomiescofcIrelandcandcFrancecare:
A. Similarcincthatctheycarecbothcbasicallyccommandcsystems
B. Similarcincthatctheycarecbothcbasicallycmarketcsystems
C. DifferentcincthatcIrelandchascaccommandcsystemcwhilecFrancechascacmarketcsystem
D. DifferentcincthatcFrancechascaccommandcsystemcwhilecIrelandchascacmarketcsystem
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c c c c
10. ThececonomiescofcNorthcKoreacandcSouthcKoreacare:
A. Similarcincthatctheycarecbothcbasicallyccommandcsystems
B. Similarcincthatctheycarecbothcbasicallycmarketcsystems
C. DifferentcincthatcNorthcKoreachascaccommandcsystemcwhilecSouthcKoreachascacmarketcsy
stem
D. DifferentcincthatcSouthcKoreachascaccommandcsystemcwhilecNorthcKoreachascacmarketcsy
stem
11. Laissez-faireccapitalismcisccharacterizedcby:
A. Veryclimitedcgovernmentcrolecincthececonomy
B. Activecgovernmentcinterventioncincthececonomy
C. Individualscandcfirmscabidingcbycacgovernmentceconomiccplan
D. Acverycfaircdistributioncofcincomecandcwealth
12. Bycfreecenterprise,cwecmeancthat:
A. Productscarecprovidedcfreectocthosecwhoccan'tcaffordctocbuycthem
B. Individualscmaycobtaincresources,corganizecproduction,candcsellcthecresultingcoutputcincanycle
galcwayctheycchoose
C. Individualcproducerscarecfreectocproducecwhatevercthecgovernmentcdecidescarecneededcbycth
ecsociety
D. Individualscarecfreectocbuycwhatevercproductscwillcsatisfyctheircneedscthecmost
13. Whichcofcthecfollowingcstatementscisccorrect?
A. Thecoperationcofcacmarketcsystemceventuallycresultscincancequalcdistributioncofcincome
B. Producerscarec"kings"cincacmarketceconomycbecausectheycdeterminecwhatciscproduced
C. Thecmarketcsystemciscefficientcatcallocatingcresources,cbutcnotcatcdistributingcproducts
D. Freedomcofcchoicecandcenterprisecarecessentialcelementscofcthecmarketcsystem
14. Incacmarketcsystem,cself-
interestciscthecmotivatingcforcecthatcdrivescthecdecisionscandcactionscofcthecfollowingcgroup
s,cexcept:
A. Workers
B. Consumers
C. Publiccofficials
D. Entrepreneurs
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c c c c
15. Howcdocworkersctypicallycexpresscself-interest?
A. Bycminimizingcthececonomicclossescofcothercbusinesscfirms
B. Bycmaximizingcthececonomiccprofitscofcothercbusinesscfirms
C. Bycseekingcthechighestcpricecwhencpurchasingcacconsumercproduct
D. Bycseekingcjobscwithcthecbestccombinationcofcwagescandcbenefits
16. Incacmarketceconomy,centrepreneurscarecmostcconcernedcwith:
A. Maximizingcutilitycorcsatisfactioncfromclimitedcincomes
B. Increasingcthecwagescandcsalariescofcworkers
C. Maximizingcprofitscorcminimizingclosses
D. Thecselfishcpursuitcofcmoney
17. Consumerscexpresscself-interestcwhencthey:
A. Seekctheclowestcpricecforcacproduct
B. Reducecbusinessclosses
C. Collectceconomiccprofits
D. Searchcforcjobscwithcthechighestcwages
18. Whichcofcthecfollowingcstatementscaboutcthecrightctocprivatecownershipciscfalse?
A. Itcenablescindividualsctocobtain,cuse,candcdisposecofclandcandccapitalcresourcescasctheycseecfit
B. Itcencouragescinvestmentcandcinnovation,candcthuscfostersceconomiccgrowth
C. Itcextendsctocintangiblescsuchcascpiecescofcmusiccandccomputercprograms
D. Itcweakenscthecincentivectocmaintaincthecpropertycthatconecalreadycowns
19. Competitionciscmoreclikelyctocexistcwhen:
A. Therecisceasycentrycintocandcexitcoutcofcindustries
B. Acgovernment-issuedclicenseciscrequiredctocsetcupcacfirmcincancindustry
C. Thecgovernmentcpurchasescmostcgoodscandcservices
D. Economiccpowerciscconcentratedcamongcacfewclargecfirms
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c c c c
Chapter 02c
c The Market System and the Circular Flow
c c c c c c
MultiplecChoicecQuestions
1. Thecmarketcsystemciscanceconomiccsystemcthat:
A. Producescmorecconsumercgoodscthanccapitalcgoods
B. Producescmoreccapitalcgoodscthancconsumercgoods
C. Givescprivatecindividualscthecrightctocowncresourcescusedcincproduction
D. Emphasizescthecgovernment'scpowerctoccontrolcmarketscandcdirectceconomiccactivity
2. Thecmarketcsystemciscoftencalsocknowncas:
A. Capitalism
B. Socialism
C. Centralcplanning
D. Regulation
3. Onecelementcofctheccommandcsystemcis:
A. Capitalism
B. Freecmarkets
C. Privatecownership
D. Centralcplanning
4. Thecextensivecprivatecownershipcofcpropertycresourcescincacmarketcsystemchascthecfollowingci
mplications,cexcept:
A. Thecmarketcsystemciscalsocknowncasccapitalism
B. Tradescthatctakecplacecincacmarketcsystemcarecmutually-agreeablectransactions
C. Investment,cinnovation,candcmaintenancecofcpropertycarecfosteredcbycthecmarketcsystem
D. Thecstrongcincthecsocietyccouldcaccumulatecpropertycbycoverpoweringcthecweak
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c c c c
5. Whichcstatementcbestcdescribescthecmarketcsystem?
A. Entrepreneurscdirectcproductioncactivities,candcmarketcpricescallocatecgoodscandcservices
B. Governmentcpoliciescdirectcproductioncactivitiescandcallocatecgoodscandcservices
C. Governmentcpoliciescdirectcproductioncactivities,cwhilecmarketcpricescallocatecgoodscandcs
ervices
D. Individualscandcmarketscallcfunctioncsmoothlycundercthecguidancecandcregulationcofcthecg
overnment
6. Incaccommandcsystem:
A. Self-
interestcguidescandccommandscindividualsctocpursuecactionscthatcleadcthemctowardcachieving
ctheircgoals
B. Thecheadcofceachcfamilycdecidescwhatctocdocwithcthecfamily'scresources
C. Thecgovernmentcmakescproductioncandcallocationcdecisions
D. Marketctradersccommandcwhatcoutputscarecproducedcandchowctheycarecallocated
7. Whichcwouldcnotcbeccharacteristiccofcaccapitalistceconomy?
A. Governmentcownershipcofcmostcfactorscofcproduction
B. Competitioncandcunrestrictedcmarkets
C. Relianceconcthecmarketcsystem
D. Freedomcofcenterprisecandcchoice
8. Acbasicccharacteristiccofcaccommandcsystemciscthat:
A. Wagescpaidctoclaborcarechigher
B. Governmentcownscmostceconomiccresources
C. Freecmarketscarecnevercpermittedcincaccommandceconomy
D. Governmentcplannerscplaycaclimitedcrolecincdecidingcwhatcgoodscwillcbecproduced
9. ThececonomiescofcIrelandcandcFrancecare:
A. Similarcincthatctheycarecbothcbasicallyccommandcsystems
B. Similarcincthatctheycarecbothcbasicallycmarketcsystems
C. DifferentcincthatcIrelandchascaccommandcsystemcwhilecFrancechascacmarketcsystem
D. DifferentcincthatcFrancechascaccommandcsystemcwhilecIrelandchascacmarketcsystem
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c c c c
10. ThececonomiescofcNorthcKoreacandcSouthcKoreacare:
A. Similarcincthatctheycarecbothcbasicallyccommandcsystems
B. Similarcincthatctheycarecbothcbasicallycmarketcsystems
C. DifferentcincthatcNorthcKoreachascaccommandcsystemcwhilecSouthcKoreachascacmarketcsy
stem
D. DifferentcincthatcSouthcKoreachascaccommandcsystemcwhilecNorthcKoreachascacmarketcsy
stem
11. Laissez-faireccapitalismcisccharacterizedcby:
A. Veryclimitedcgovernmentcrolecincthececonomy
B. Activecgovernmentcinterventioncincthececonomy
C. Individualscandcfirmscabidingcbycacgovernmentceconomiccplan
D. Acverycfaircdistributioncofcincomecandcwealth
12. Bycfreecenterprise,cwecmeancthat:
A. Productscarecprovidedcfreectocthosecwhoccan'tcaffordctocbuycthem
B. Individualscmaycobtaincresources,corganizecproduction,candcsellcthecresultingcoutputcincanycle
galcwayctheycchoose
C. Individualcproducerscarecfreectocproducecwhatevercthecgovernmentcdecidescarecneededcbycth
ecsociety
D. Individualscarecfreectocbuycwhatevercproductscwillcsatisfyctheircneedscthecmost
13. Whichcofcthecfollowingcstatementscisccorrect?
A. Thecoperationcofcacmarketcsystemceventuallycresultscincancequalcdistributioncofcincome
B. Producerscarec"kings"cincacmarketceconomycbecausectheycdeterminecwhatciscproduced
C. Thecmarketcsystemciscefficientcatcallocatingcresources,cbutcnotcatcdistributingcproducts
D. Freedomcofcchoicecandcenterprisecarecessentialcelementscofcthecmarketcsystem
14. Incacmarketcsystem,cself-
interestciscthecmotivatingcforcecthatcdrivescthecdecisionscandcactionscofcthecfollowingcgroup
s,cexcept:
A. Workers
B. Consumers
C. Publiccofficials
D. Entrepreneurs
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c c c c
15. Howcdocworkersctypicallycexpresscself-interest?
A. Bycminimizingcthececonomicclossescofcothercbusinesscfirms
B. Bycmaximizingcthececonomiccprofitscofcothercbusinesscfirms
C. Bycseekingcthechighestcpricecwhencpurchasingcacconsumercproduct
D. Bycseekingcjobscwithcthecbestccombinationcofcwagescandcbenefits
16. Incacmarketceconomy,centrepreneurscarecmostcconcernedcwith:
A. Maximizingcutilitycorcsatisfactioncfromclimitedcincomes
B. Increasingcthecwagescandcsalariescofcworkers
C. Maximizingcprofitscorcminimizingclosses
D. Thecselfishcpursuitcofcmoney
17. Consumerscexpresscself-interestcwhencthey:
A. Seekctheclowestcpricecforcacproduct
B. Reducecbusinessclosses
C. Collectceconomiccprofits
D. Searchcforcjobscwithcthechighestcwages
18. Whichcofcthecfollowingcstatementscaboutcthecrightctocprivatecownershipciscfalse?
A. Itcenablescindividualsctocobtain,cuse,candcdisposecofclandcandccapitalcresourcescasctheycseecfit
B. Itcencouragescinvestmentcandcinnovation,candcthuscfostersceconomiccgrowth
C. Itcextendsctocintangiblescsuchcascpiecescofcmusiccandccomputercprograms
D. Itcweakenscthecincentivectocmaintaincthecpropertycthatconecalreadycowns
19. Competitionciscmoreclikelyctocexistcwhen:
A. Therecisceasycentrycintocandcexitcoutcofcindustries
B. Acgovernment-issuedclicenseciscrequiredctocsetcupcacfirmcincancindustry
C. Thecgovernmentcpurchasescmostcgoodscandcservices
D. Economiccpowerciscconcentratedcamongcacfewclargecfirms
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