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Test Bank for Macroeconomics 21st Edition McConnell Brue Flynn
1259915670 9781259915673
Chapter 02 The Market System and the Circular Flow Answer Key
4. Of the following countries, which one best exhibits the characteristics of a market economy?
2-1
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A. Canada
B. Cuba
C. North Korea
D. Belarus
6. An economic system
A. land and other natural resources should be privately owned, but capital should be publicly owned.
B. land and other natural resources should be publicly owned, but capital should be privately owned.
C. government should not interfere with the operation of the economy.
D. government action is absolutely necessary if the economy is to achieve full employment and full production.
2-2
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8. Economic systems differ according to which two main characteristics?
A. who owns the factors of production and the methods used to coordinate economic activity
B. the technology used in production and the quantity and quality of natural resources
C. how goods are produced and who gets them
D. the political system in place and the degree of scarcity facing the economy
9. Command systems are also known as
A. market systems.
B. pure capitalism.
C. laissez-faire capitalism.
D. communism.
A. private property
B. freedom of enterprise
C. government ownership of most property resources
D. competition in product and resource markets
A. discourages cooperation because people don't want to part with what they own.
B. discourages innovation, as people are often afraid to risk losing their own property.
C. encourages owners to maintain or improve their property so as to preserve or enhance value.
D. does everything indicated by the other answers.
A. capital goods. B.
humancapital. C.
property rights. D.
public goods.
A. allowing workers to take advantage of existing differences in their abilities and skills.
B. avoiding the time loss involved in shifting from one production task to another.
C. allowing workers to develop skills by working on one, or a limited number, of tasks.
D. all of the means identified in the other answers.
21.
22.
On the basis of the information, and assuming trade occurs between the three states, we can expect
23. Barter
27. From society's point of view, the economic function of profits and losses is to
2-5
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A. promote the equal distribution of real assets and wealth.
B. achieve full employment and price level stability.
C. contribute to a more equal distribution of income.
D. reallocate resources from less-desired to more-desired uses.
28. In a market economy, a significant change in consumers' desire for product X will
31. If consumer desire for product X increases, all of the following will occur except
A. encourages innovation because government provides tax breaks and subsidies to those who develop new products or new
productive techniques.
B. discourages innovation because it is difficult to acquire additional capital in the form of new machinery and equipment.
C. discourages innovation because firms want to get all the profits possible from existing machinery and equipment.
D. encourages innovation because successful innovators are rewarded with economic profits.
38. The most efficient combination of resources in producing a given output is the combination that
A. comes closest to using the same quantities of land, labor, capital, and entrepreneurial ability.
B. minimizes the cost per unit of output.
C. uses the smallest total quantity of all resources.
D. conserves most on the use of labor.
40.
2-7
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Answer the question using the following data, which show all available techniques for producing 20 units of a particular
commodity
Possible
product
Resource Resourc ion
e Techni
price ques
s # # # # #
Land $4 2 4 2 4 4
Labor 3 1 2 4 1 3
Capital 3 5 2 3 1 2
Entrepreneu 2 3 1 1 4 1
rial
Ability
In view of the indicated resource prices, the economically most efficient production
technique(s) is (are) technique(s)
A. 1.
B. 2 and 4.
C. 3.
D. 1 and 3.
41.
Answer:the question using the following data, which show all available techniques for producing 20 units of a particular commodity
Possible
product
Resource Resour ion
ce Techni
pric ques
es # # # # #
Land $4 2 4 2 4 4
Labor 3 1 2 4 1 3
Capital 3 5 2 3 1 2
Entrepreneur 2 3 1 1 4 1
ial Ability
Assuming that the firm is motivated by self-interest and that the 20 units that can be produced with each technique can be sold for $2
per unit, the firm will
42.
Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity
Possible
product
Resource Resour ion
ce Techni
pric ques
es # # # # #
Land $4 2 4 2 4 4
Labor 3 1 2 4 1 3
Capital 3 5 2 3 1 2
Entrepreneu 2 3 1 1 4 1
rial
Ability
If a new production technique is developed that enables a firm to produce 20 units of output with 3 units of land, 3 of
labor, 1 of capital, and 2 of entrepreneurial ability, this technique would
A. not be adopted because, although it reduces production costs, it does not increase profit.
B. be adopted because it would lower production costs and increase economic profit.
C. not be adopted because it entails higher production costs than other available techniques.
D. be adopted, even though economic profits would be reduced slightly.
43.
Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor
and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively.
Production
Techniqu
es:
I II III I
Labor 4 3 2 5
Capit 2 3 5
al 1
A. I
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B. II
C. III
D. IV
44.
2-10
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Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing
just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively.
Production
Techniqu
es:
I II III I
Labo 4 3 2 5
r
Capit 2 3 5
al 1
45. In a competitive market economy, firms select the least-cost production technique because
46. The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially
2-11
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47. The market system's answer to the fundamental question "How will the system accommodate change?" is essentially
48. The market system's answer to the fundamental question "How will the system promote progress?" is essentially
A. fact that resource prices are higher than product prices in capitalistic economies.
B. idea that the pursuit of self-interest is in the public interest.
C. idea that the decisions of producers must ultimately conform to consumer demands.
D. fact that a federal agency exists to protect consumers from harmful and defective products.
50. The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market
economy. This statement best describes the conceptof
A. derived demand.
B. consumer sovereignty.
C. the invisible hand.
D. market failure.
A. buyers can dictate the prices at which goods and services will be offered.
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.
A. fact that the U.S. tax system redistributes income from rich to poor.
B. notion that, under competition, decisions motivated by self-interest promote the social interest.
C. tendency of monopolistic sellers to raise prices above competitive levels.
D. fact that government controls the functioning of the market system.
53. The invisible hand concept suggests that
56. "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
57. "Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfil the output
quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best
identifies the
58. The incentive problem under communist central planning refers to the idea that
59. Suppose that an individual sees a tremendous opportunity to produce and sell a new product but dismisses the idea because there is no
way to exploit this opportunity for personal gain. This situation best identifies the
62. In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?
A. partnerships
B. corporations
C. sole proprietorships
D. in all of the businesses listed in the other answers
A. households are on the buying side of both product and resource markets.
B. businesses are on the selling side of both product and resource markets.
C. households are on the selling side of the resource market and on the buying side of the product market.
D. businesses are on the buying side of the product market and on the selling side of the resource market.
64. The two basic markets shown by the simple circular flow model are
2-14
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67.
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The Project Gutenberg eBook of Tony the
Tramp; Or, Right is Might
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Language: English
A new edition, five by seven inches, from new plates, with new
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THE NEW YORK BOOK COMPANY
147 Fourth Avenue New York, N. Y.
“Tony the Tramp, now the Hon.
Anthony
Middleton of Middleton Hall.”
TONY THE TRAMP
OR
RIGHT IS MIGHT
BY
CHAPTER I
TWO TRAMPS
AT THE FARMHOUSE
“Where are we going to stop to-night?” asked Tony ten minutes later.
There,” answered Rudolph, pointing out a farmhouse a little to the
left.
Suppose they won’t let us.”
“They will admit us into the barn at least, if we play our cards right.
Listen to what I say. You are to be my son.”
“But I am not your son.”
“Be silent!” said the other tramp, “and don’t you dare to contradict
me. You have been sick, and are too weak to go further.”
“That is a lie, Rudolph.”
“That doesn’t matter. If they believe it, they won’t turn us away.
Perhaps they will let you sleep in the house.”
“Away from you?”
“Yes.”
Tony was puzzled. It seemed as if Rudolph wanted him to be more
comfortably provided for than himself, but the boy knew him too
well not to suspect that there was some concealed motive for this
apparent kindness.
Well, what are you thinking about?” demanded Rudolph,
suspiciously, as he observed the boy’s earnest gaze.
Why do you want me to sleep in the house?” he asked.
I will tell you. When all the family are asleep, I want you to steal
downstairs, open the back door, and let me in.”
“What for?” asked the boy, startled.
Never you mind. Do as I tell you.”
“But I don’t want to do it. You never asked me to do that before.”
“Didn’t I? Well, I had no occasion. I ask you now.”
“What are you going to do? Are you going to harm anyone?”
“No. I’ll tell you what I’m going to do, but mind you, if you breathe a
word to any being, I’ll cut your tongue out.”
Tony looked troubled, but not frightened.
Go on,” he said.
Rudolph continued in a rapid tone.
I want money to carry out a plan of importance. This farm belongs
to a farmer who is rich, and who keeps a part of his money in the
house.”
“How do you know that?”
“A friend of mine stopped there last week, and found out. He put me
on the scent. The old man keeps from two to three hundred dollars
in his desk. I must have that money.”
“I don’t want to help you in this, Rudolph,” said Tony. “I won’t betray
you, but you mustn’t compel me to be a thief.”
“I can’t get along without you, and help me you must.”
“Suppose we fail?”
“Then we must take to our legs. If we’re caught we’re both in the
same box. I don’t ask you to take any risks that I don’t run myself.”
Tony was about to remonstrate further, but it was too late. They had
already reached the farmhouse, and caught sight of the owner
standing under a tree in the front yard.
Remember!” hissed the older tramp. “Follow my lead, or I’ll beat you
till you are half dead. Good-evening, sir.”
This last was said in an humble tone to the farmer, who advanced to
the gate.
“Good-evening,” said the farmer, ingenuously.
He was a man of sixty, roughly dressed to suit his work, with grizzled
hair, a form somewhat bowed, and a face seamed with wrinkles. He
had been a hard worker, and showed abundant traces of it in his
appearance.
We are very tired and hungry, my boy and I,” whined Rudolph.
“We’ve traveled many miles since morning. Would you kindly give us
some supper and a night’s lodging?”
“My wife’ll give you something to eat,” said the old man. “Thank
Heaven! we’ve got enough for ourselves and a bit for the poor
besides. But I don’t know about lodging. I don’t like to take in
strangers that I know nothing about.”
“I don’t blame you, sir,” said Rudolph, in a tone of affected humility.
“There’s many rogues going round the country, I’ve heard, but I’m a
poor, hard-working man.”
“Then why are you not at work?”
“Times are hard, and I can get nothing to do. I am in search of
work. I can do almost anything. I’m a carpenter by trade.”
Rudolph knew no more of the carpenter’s trade than the man in the
moon, but that would do as well as any other.
“Where are you from?”
“From Buffalo,” he answered, with slight hesitation.
“Is business dull there?”
“Nothing doing.”
“Well, my friend, you haven’t come to the right place. There’s
nothing but farming done here.”
“I don’t know anything about that,” said Rudolph, hastily, for he had
no disposition to be set to work in the fields.
I don’t need any extra hands,” said the farmer.
I am glad of that,” thought the tramp.
“Go round to the back door, and I will speak to my wife about
supper,” said the old man.
Come, Tony,” said Rudolph, motioning to take the boy’s hand, but
Tony did not see fit to notice the movement, and walked in silence
by his side.
A motherly looking old woman made her appearance at the back
door.
Come in,” she said. “Come right in, and sit down to the table. Abner,
make room for the poor man and his son.”
Abner was a stalwart youth of eighteen, hard-handed and muscular.
He was the only permanent “hired man” employed on the farm. In
haying time there were others transiently employed.
A farmer’s table is plentiful, though homely. The two tramps made
an abundant meal, both doing justice to the homely fare. The
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