The competitive market system encourages innovation and technological advance, primarily through:

profitable returns to innovative firms

The command systems of the Soviet Union and Eastern Europe failed in part because:

it is difficult to coordinate economic decisions with so many factors

Change in consumer preferences leads to more consumers registering their "dollar votes" for peaches. What will happen?

Profits of peach growers will rise and peach production will rise

Human specialization, or the division of labor:

increases output by letting workers take advantage of differences in skills

For a laissez-faire system, which of the following best answers the question, What goods and services will be produced?

A good that returns its producers sufficient revenue to cover total costs

Economic profits and losses:

help determine which industries survive or fail

A firm will earn a positive economic profit if:

its total sales revenue exceeds the sum of all its costs

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Market Systems and the Circular Flow Model

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AP Microeconomics Chapter 2

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Questions 10

Answers

1
The competitive market system encourages innovation and technological advance, primarily through:
profitable returns to innovative firms
the process of "dollar voting"
the government's tax code
the guiding function of consumer needs and preferences
2
A firm produces 1 unit of output using labor ($2/unit) and capital ($4/unit). Find the most efficient technique
C
A
D
B
3
In the diagram, consumer expenditures are represented by:
Flow 3
Flow 4
Flow 2
Flow 1
4
The command systems of the Soviet Union and Eastern Europe failed in part because:
firms manufactured more output than consumers could afford to buy
prices were set too low in all markets
it is difficult to coordinate economic decisions with so many factors
previously abundant economic resources became scarce
5
Change in consumer preferences leads to more consumers registering their "dollar votes" for peaches. What will happen?
Profits of peach growers will fall and peach production will fall
Profits of peach growers will fall and peach production will rise
Profits of peach growers will rise and peach production will rise
Profits of peach growers will rise and peach production will fall
6
Human specialization, or the division of labor:
reduces output by discouraging workers from learning a variety of tasks
increases output by allowing workers to each perform a variety of tasks
increases output by letting workers take advantage of differences in skills
reduces output by dehumanizing workers
7
The laissez-faire system is characterized by:
centralized decision-making
limited use of capital goods
widespread use of government price controls
private property rights
8
For a laissez-faire system, which of the following best answers the question, What goods and services will be produced?
Only those goods whose long-term profits are greater than average
A good that returns its producers sufficient revenue to cover total costs
Any good whose production is characterized by the least-cost technology
Any good for which consumers are willing to pay a positive price
9
Economic profits and losses:
answer the question "Who will get the output?"
answer the question "How will the goods and services be produced?"
help determine which industries survive or fail
are the expected outcomes of a decrease/increase in dollar votes
10
A firm will earn a positive economic profit if:
its total sales revenue exceeds the sum of all its costs
total sales revenue = total cost of labor, capital, raw materials etc.
it is regulated by government
it produces its output utilizing the least-cost production method

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