ECON 202 CH 2

38. An increase in consumer desire for strawberries is most likely to:
A. increase the number of strawberry pickers needed by farmers.
B. reduce the supply of strawberries.
C. reduce the number of people willing to pick strawberries.
D. reduce the need for strawberry pickers.

A. increase the number of strawberry pickers needed by farmers.

39. If competitive industry Y is incurring substantial losses, output will:
A. expand as resources move toward industry Y.
B. contract as resources move toward industry Y.
C. contract as resources move away from industry Y.
D. expand as resources move away from industry Y.

C. contract as resources move away from industry

40. The economic function of profits and losses is to:
A. bring about a more equal distribution of income.
B. signal that resources should be reallocated.
C. eliminate small firms and reduce competition.
D. tell government which industries need to be subsidized.

B. signal that resources should be reallocated.

41. If a competitive industry is neither expanding nor contracting, we would expect:
A. total revenue to be zero.
B. economic profits to be zero.
C. total opportunity cost to be zero.
D. more resources to flow to that industry.

B. economic profits to be zero.

45. Firms are motivated to minimize production costs because:
A. it is the most environmentally friendly way to produce goods.
B. least-cost production techniques use the smallest total quantity of resources.
C. competitive pressures in the market will drive out higher-cost producers.
D. the government provides tax credits and subsidies to low-cost producers.

C. competitive pressures in the market will drive out higher-cost producers.

51. In a competitive market economy firms select the least-cost production technique because:
A. such choices will result in full employment of available resources.
B. to do so will maximize the firms' profits.
C. this will prevent new firms from entering the industry.
D. "dollar voting" by consumers mandates such a choice.

B. to do so will maximize the firms' profits.

55. The market system's answer to the fundamental question "How will the system accommodate change?" is essentially:
A. "Through government leadership and direction."
B. "Through the guiding function of prices and the incentive function of profits."
C. "Through training and retraining programs."
D. "Through trial and error."

B. "Through the guiding function of prices and the incentive function of profits."

56. The market system's answer to the fundamental question "How will the system promote progress?" is essentially:
A. "Through government funded research programs."
B. "Through redistribution of income to promote greater equality."
C. "Through training and retraining programs."
D. "Through the profit potential that encourages development of new technology."

D. "Through the profit potential that encourages development of new technology."

54. The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:
A. "Those willing and able to pay for them."
B. "Those who physically produced them."
C. "Those who most need them."
D. "Those who get utility from them."

A. "Those willing and able to pay for them."

61. "Consumer sovereignty" means that:
A. buyers can dictate the prices at which goods and services will be purchased.
B. advertising is ineffective because consumers already know what they want.
C. buyers control the quality of goods and services through regulatory agencies.
D. buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

D. buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

66. The market system:
A. produces considerable inefficiency in the use of scarce resources.
B. effectively harnesses the incentives of workers and entrepreneurs.
C. is not consistent with freedom of choice in the long run.
D. has slowly lost ground to emerging command systems.

B. effectively harnesses the incentives of workers and entrepreneurs.

72. The incentive problem under communist central planning refers to the idea that:
A. planners had to direct required inputs to each enterprise.
B. workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.
C. the immediate effect of more investment was less consumption.
D. exports had to be equal to imports for a central plan to work.

B. workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.

77. If products were in short or surplus supply in the Soviet Union:
A. price and profit signals eliminated those shortages and surpluses.
B. price and profit signals intensified those shortages and surpluses.
C. producers would not react because no price or profit signals occurred.
D. the planners would immediately adjust production to achieve equilibrium.

C. producers would not react because no price or profit signals occurred.

80. The two basic markets shown by the simple circular flow model are:
A. capital goods and consumer goods.
B. free and controlled.
C. product and resource.
D. household and business.

C. product and resource.

81. In the resource market:
A. businesses borrow financial capital from households.
B. businesses sell services to households.
C. households sell resources to businesses.
D. firms sell raw materials to households.

C. households sell resources to businesses.

82. In the simple circular flow model:
A. households are buyers of resources.
B. businesses are sellers of final products.
C. households are sellers of final products.
D. there are real flows of goods, services, and resources, but not money flows.

B. businesses are sellers of final products.

ECON 202 CH 2 - Subjecto.com

ECON 202 CH 2

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38. An increase in consumer desire for strawberries is most likely to:
A. increase the number of strawberry pickers needed by farmers.
B. reduce the supply of strawberries.
C. reduce the number of people willing to pick strawberries.
D. reduce the need for strawberry pickers.

A. increase the number of strawberry pickers needed by farmers.

39. If competitive industry Y is incurring substantial losses, output will:
A. expand as resources move toward industry Y.
B. contract as resources move toward industry Y.
C. contract as resources move away from industry Y.
D. expand as resources move away from industry Y.

C. contract as resources move away from industry

40. The economic function of profits and losses is to:
A. bring about a more equal distribution of income.
B. signal that resources should be reallocated.
C. eliminate small firms and reduce competition.
D. tell government which industries need to be subsidized.

B. signal that resources should be reallocated.

41. If a competitive industry is neither expanding nor contracting, we would expect:
A. total revenue to be zero.
B. economic profits to be zero.
C. total opportunity cost to be zero.
D. more resources to flow to that industry.

B. economic profits to be zero.

45. Firms are motivated to minimize production costs because:
A. it is the most environmentally friendly way to produce goods.
B. least-cost production techniques use the smallest total quantity of resources.
C. competitive pressures in the market will drive out higher-cost producers.
D. the government provides tax credits and subsidies to low-cost producers.

C. competitive pressures in the market will drive out higher-cost producers.

51. In a competitive market economy firms select the least-cost production technique because:
A. such choices will result in full employment of available resources.
B. to do so will maximize the firms’ profits.
C. this will prevent new firms from entering the industry.
D. "dollar voting" by consumers mandates such a choice.

B. to do so will maximize the firms’ profits.

55. The market system’s answer to the fundamental question "How will the system accommodate change?" is essentially:
A. "Through government leadership and direction."
B. "Through the guiding function of prices and the incentive function of profits."
C. "Through training and retraining programs."
D. "Through trial and error."

B. "Through the guiding function of prices and the incentive function of profits."

56. The market system’s answer to the fundamental question "How will the system promote progress?" is essentially:
A. "Through government funded research programs."
B. "Through redistribution of income to promote greater equality."
C. "Through training and retraining programs."
D. "Through the profit potential that encourages development of new technology."

D. "Through the profit potential that encourages development of new technology."

54. The market system’s answer to the fundamental question "Who will get the goods and services?" is essentially:
A. "Those willing and able to pay for them."
B. "Those who physically produced them."
C. "Those who most need them."
D. "Those who get utility from them."

A. "Those willing and able to pay for them."

61. "Consumer sovereignty" means that:
A. buyers can dictate the prices at which goods and services will be purchased.
B. advertising is ineffective because consumers already know what they want.
C. buyers control the quality of goods and services through regulatory agencies.
D. buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

D. buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

66. The market system:
A. produces considerable inefficiency in the use of scarce resources.
B. effectively harnesses the incentives of workers and entrepreneurs.
C. is not consistent with freedom of choice in the long run.
D. has slowly lost ground to emerging command systems.

B. effectively harnesses the incentives of workers and entrepreneurs.

72. The incentive problem under communist central planning refers to the idea that:
A. planners had to direct required inputs to each enterprise.
B. workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.
C. the immediate effect of more investment was less consumption.
D. exports had to be equal to imports for a central plan to work.

B. workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.

77. If products were in short or surplus supply in the Soviet Union:
A. price and profit signals eliminated those shortages and surpluses.
B. price and profit signals intensified those shortages and surpluses.
C. producers would not react because no price or profit signals occurred.
D. the planners would immediately adjust production to achieve equilibrium.

C. producers would not react because no price or profit signals occurred.

80. The two basic markets shown by the simple circular flow model are:
A. capital goods and consumer goods.
B. free and controlled.
C. product and resource.
D. household and business.

C. product and resource.

81. In the resource market:
A. businesses borrow financial capital from households.
B. businesses sell services to households.
C. households sell resources to businesses.
D. firms sell raw materials to households.

C. households sell resources to businesses.

82. In the simple circular flow model:
A. households are buyers of resources.
B. businesses are sellers of final products.
C. households are sellers of final products.
D. there are real flows of goods, services, and resources, but not money flows.

B. businesses are sellers of final products.

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