ECON 1002

Barter requires that you A. know the market value of all the goods and services that you want and have to offer. B. find a person who has what you want and a person who needs what you have to offer. C. are a member of an established barter network. D. live in an area where there are people with diverse talents and a market with diverse products.

B. find a person who has what you want and a person who needs what you have to offer.

The use of capital in the production process A. replaces labor. B. improves efficiency, increases output, and provides for growth. C. improves efficiency, reduces output, and provides for growth. D. is more expensive than labor.

B. improves efficiency, increases output, and provides for growth.

The emergence of the MP3 (iPod) technology is an example of "creative destruction" because A. the MP3 (iPod) industry is becoming more efficient. B. it is less expensive than compact discs for the storage and transfer of music. C. the firms that produced compact discs now produce DVDs. D. it has replaced compact discs as a technology used for the storage and transfer of music.

B. it is less expensive than compact discs for the storage and transfer of music.

True or False: Households sell finished products to businesses. False. True.

False

What is produced is ultimately determined by A. consumers because if the goods offered are not what consumers want, consumers will not buy them. B.producers because they are driven by profits. C. consumers because they participate in marketing surveys. D. producers because they determine what to produce.

A. consumers because if the goods offered are not what consumers want, consumers will not buy them.

In market economies, firms rarely worry about the availability of inputs to produce their products, whereas in command economies input availability is a constant concern because A. in market economies, buyers of inputs know that sellers want to earn profits. B. in market economies, buyers of inputs know that consumers want the product. C. in command economies, input availability is determined by planners that may not correctly respond to consumer demand. D. in command economies, input availability is determined by a market that may not provide adequate inputs.

A. in market economies, buyers of inputs know that sellers want to earn profits.

Some large hardware stores such as Home Depot boast of carrying as many as 20,000 different products in each store. This volume of goods is the result of A. the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits. B. the purchasing agents of Home Depot who have determined what goods producers have available. C. the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to satisfy their wants. D. the purchasing agents of Home Depot who have determined what goods consumers want.

A. the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits.

In a market system, scarce goods are allocated through the operation of A. fixed prices that are determined by consumers and producers acting in the public interest. B. market prices that are determined by consumers and producers acting in their own self-interest. C. estimated prices that are determined by consumers and producers acting in their own self-interest. D. market prices that are determined by consumers and producers acting in the public's interest.

B. market prices that are determined by consumers and producers acting in their own self-interest.

The market system depends on private property ownership and the protection of private property rights to A. ensure that those who own property use it wisely. B. provide an incentive to maintain property and allow for the orderly transfer of property ownership. C. establish the cost of administration and transfer of property. D. make sure that there are adequate safeguards against theft.

B. provide an incentive to maintain property and allow for the orderly transfer of property ownership.

In the circular flow model, there is a flow of A. real goods and services and a flow of output. B. real goods and services and a flow of money. C. labor and a flow of money. D. real goods and services and a flow of labor.

B. real goods and services and a flow of money.

In the circular flow model A. resource markets provide for the goods and services and product markets provide for the exchange of exchange of labor. B. resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services. C. labor markets provide for the transfer of money and goods markets provide for the transfer of inputs. D. goods markets provide for the transfer of money and labor markets provide for the transfer of inputs.

B. resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services.

Consider the following statement: "The market system is a profit-and-loss system." This statement is A. false, because consumers purchase only what they want, providing producers profits. B. true, because producer decisions are motivated by the attempt to earn profits. C. true, because consumers purchase only what they want, providing producers profits. D. false, because the market system does much more than provide profits and losses.

B. true, because producer decisions are motivated by the attempt to earn profits.

Franklin, John, Henry, and Harry have decided to pool their financial resources and business skills in order to open up and run a coffee shop. They will share any profits or losses that the business generates and will be personally responsible for making good on any debt that their business undertakes. Their business should be classified as a: A. Corporation. B. Sole proprietorship. C. Partnership. D. None of the above.

C. Partnership.

Ted and Fred are the owners of a gas station. They invested $150,000 each and pay an employee named Lawrence $35,000 per year. This year revenues are $900,000, while costs are $940,000. Who is legally responsible for bearing the $40,000 loss? A. Lawrence. B. Ted. C. Ted and Fred. D. Lawrence, Ted, and Fred.

C. Ted and Fred.

In a command economy, scarce goods are allocated by A. an elected planning board based on the board's preferences. B. an elected planning board based on the board's long-term priorities. C. a government-appointed planning board based on the board's long-term priorities. D. a government-appointed planning board based on the board's preferences.

C. a government-appointed planning board based on the board's long-term priorities.

In the circular flow model A. businesses buy goods and sell labor; households sell goods and buy labor. B. businesses buy goods and buy labor; households sell goods and sell labor. C. businesses sell goods and buy labor; households buy goods and sell labor. D. businesses sell goods and sell labor; households buy goods and buy labor.

C. businesses sell goods and buy labor; households buy goods and sell labor.

There is a wide variety of desired goods and services in a market system because A. there is always a need to produce something new and improved. B. producers determine what to produce. C. individual wants are diverse. D. consumers change their minds frequently.

C. individual wants are diverse.

The phrase "invisible hand" means that A. market prices are not always known to buyers and sellers. B. no one person or firm actually sets the price. C. market prices provide information to consumers regarding products they wish to purchase, and to producers regarding products they wish to produce. D. buyers and sellers often do not meet so the transactions are invisible.

C. market prices provide information to consumers regarding products they wish to purchase, and to producers regarding products they wish to produce.

The use of money A. establishes the value of goods and services. B. provides a common value that makes bartering transactions simpler. C. provides a common value that makes buying and selling transactions simpler than would be the case with barter. D. provides a common value that makes buying and selling transactions simpler as long as there is one currency in use.

C. provides a common value that makes buying and selling transactions simpler than would be the case with barter.

"Division of labor" means that workers A. share the labor needed to complete a job. B. develop skills needed to complete a job. C. specialize in tasks that take advantage of their individual abilities and skills. D. identify the products than can be produced so that they can take advantage of their individual abilities and skills.

C. specialize in tasks that take advantage of their individual abilities and skills.

Consider the statement: "We want money only to part with it." When people express a desire to 'have money,' they really want A. to be rich. B. a better paying job. C. the goods and services that money can buy. D. a larger balance in their checking accounts.

C. the goods and services that money can buy.

When an economy relies on specialization, A. there will be more efficiency in production, but there will be disruptions in the distribution of goods. B. centralized coordination is needed to ensure that everyone obtains the goods they need. C. trade enables individuals to obtain the goods in which they do not have a specialization. D. trade is established according to the value of the specialized product.

C. trade enables individuals to obtain the goods in which they do not have a specialization.

Self-interest helps achieve society's economic goals because A. producers know which goods consumers want the most. B. consumers know which goods can be produced at the lowest cost. C. consumers and producers both operate based on society's economic goals. D. as consumers and producers exercise their freedom to act in their own self-interest markets will produce the desired goods at the lowest possible cost.

D. as consumers and producers exercise their freedom to act in their own self-interest markets will produce the desired goods at the lowest possible cost.

Consider the following statement: "Competition is the disciplinarian of the market economy." This statement is A. false, because when producers face competition, they are driven to provide more goods and services and costs will rise. B. false, because when consumers realize there is competition, they are driven to demand more goods. C. true, because when consumers realize there is competition, they are driven to demand more goods. D. true, because when producers face competition they are driven to provide goods and services at the lowest possible cost.

D. true, because when producers face competition they are driven to provide goods and services at the lowest possible cost.

True or False: Money must be issued by a government for people to accept it.

False

Decide whether each of the following descriptions most closely corresponds to being part of a command system, a market system, or a laissez-faire system. a. A woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area: b. Shops stock and sell the goods customers want but the government levies a sales tax on each transaction to fund elementary schools, public libraries, and welfare programs: c. The only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforce contracts between private citizens:

a. command system b. market system c.laissez-faire system