Econ Chapter 2 Quiz

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consumer sovereignty refers to the
idea that the decisions of producers and resource suppliers with respect to the kinds and amounts of goods produced must be appropriate to consumer demands.
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 concept of:
consumer sovereignty.
which of the following best describes the invisible-hand concept?
the desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.
two major virtues of the market system are that it:
allocates resources efficiently and allows economic freedom.
if products were in short or surplus supply in the soviet union
producers would not react because no price or profit signals occurred.
the simple circular flow model shows that:
households are on the selling side of the resource market and on the buying side of the product market.
the two basic markets shown by the simple circular flow model are:
product and resource.
in the simple circular flow model:
businesses are sellers of final products.

refer to the above diagram. flow (1) represents:
wage, rent, interest, and profit income.
refer to the above diagram. flow (2) represents
land, labor, capital, and entrepreneurial ability.
in terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.
product; resource
in terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.
product; resource
in the circular flow model:
households sell resources to firms
(consider this) in 1975 mcdonald's introduced its egg mcmuffin breakfast sandwich, which remains popular and profitable today. this longevity illustrates the idea of:
consumer sovereignty.
(last word) according to economist donald boudreaux, the world's tens of billions of individual resources get arranged productively:
because private property encourages people to consider the alternative uses of their resources and select those that provide the most rewards
which of the following is a distinguishing feature of a market system?
wide-spread private ownership of capital.
of the following countries, the one that best exhibits the characteristics of a market economy is:
the term laissez faire suggests that:
government should not interfere with the operation of the economy.
economic scarcity:
applies to all economies.
economic systems differ according to what two main characteristics?
who owns the factors of production, and the methods used to coordinate economic activity.
which of the following is not a characteristic of the market system?
government ownership of the major industries.
which of the following is a fundamental characteristic of the market system?
property rights.
the pursuit of self-interest:
gives direction to the market system.
competition means that:
there are independently-acting buyers and sellers in each market.
the division of labor means that:
workers specialize in various production tasks.
entails the exchange of goods for goods.
which of the following is one of the five fundamental questions?
what goods and services will be produced?
the market system's answer to the fundamental question "who will get the goods and services?" is essentially:
"those willing and able to pay for them."
the market system's answer to the fundamental question "how will the system promote progress?" is essentially:
"through the profit potential that encourages development of new technology."
the advent of dvds threatens to eventually demolish the market for videocassettes. this is an example of:

creative destruction.

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