QUESTION 2

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the?

A. incentive problem under central planning.

B. coordination problem under central planning.

C. self-sufficiency dilemma under communism.

D. resource overcommitment problem under communism.

QUESTION 4

Refer to the diagram. Flow 3 represents?

A. wage, rent, interest, and profit income.

B. land, labor, capital, and entrepreneurial ability.

C. goods and services.

D. consumer expenditures.

QUESTION 5

The market system is an economic system that ?

A. produces more consumer goods than capital goods.

B. produces more capital goods than consumer goods.

C. gives private individuals the right to own resources used in production.

D. emphasizes the government's power to control markets and direct economic activity.

QUESTION 6

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.

QUESTION 7

Businesses seeking higher profits and resource suppliers seeking higher incomes lead to changes in the allocation of resources among different firms and end up with ?

A. consumers at the losing end.

B. output that society wants.

C. unnecessary conflict and turmoil.

D. a need for government action.

QUESTION 8

The use of money for exchange and trade?

A. increases the importance of barter.

B. fosters more specialization in production.

C. reduces consumer sovereignty.

D. raises the need for a coincidence of wants.

QUESTION 9

The simple circular flow model shows that workers and capital owners offer their services to firms through the ?

A. product markets.

B. resource markets.

C. money markets.

D. financial markets.

QUESTION 10

By freedom of enterprise, we mean that individual?

A. workers are free to look for jobs and work in whichever firm will hire them.

B. firms are free to employ resources, to produce their output, and to sell their products.

C. producers are free to produce whatever the government decides is needed by the society.

D. consumers are free to buy whatever products will satisfy their needs the most.