Microeconomics Practice Test

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Principles of Microeconomics
Take Home Test #4F - Chapters 28, 29, 5 & 32 (Miller Spring 2006) Choose the one alternative that best completes the statement or answers the question.

1) All economic systems must answer which questions?
A) Who get the goods, how do they get them, and why do they get them. B) Who get the goods, how do they get them, and what do they get them for. C) How are goods and services distributed, who gets the goods and services produced, what goods and services will be produced. D) How are goods and services produced, who gets the goods and services produced, what goods and services will be produced. E) What goods are produced, how are they produced, and to whom does the government distribute the goods,

2) A market system, or price system is an economic system which A) uses relative prices to signal changes in supply and demand. B) uses prices to decide what will be produced and in what quantities, but not in deciding the distribution of income. C) relies heavily on centralized decision-making by government bodies. D) answers the last two basic economic questions, but not the first. E) uses prices to decide all economic and political questions.

3) A command system is an economic system which
A) uses relative prices to signal changes in supply and demand. B) uses prices to decide what will be produced and in what quantities, but not in deciding the distribution of income. C) relies heavily on centralized decision-making by government bodies. D) answers the last two basic economic questions, but not the first. E) uses prices to decide all economic and political questions.

4) Capitalism requires private property rights because without these rights: A) governments planning would be impossible.
B) equitable outcomes would be more difficult to achieve.
C) market incentives to produce would be inadequate.
D) self-interest would overwhelm selflessness and too little output would be produced. E) capitalists would control the world.

5) In a market economy, goods and services are allocated on the basis of A) the willingness and ability of an individual to pay.
B) the need of an individual.
C) the wants of individuals.
D) what bureaucrats think the allocation should be.
E) the political power of bureaucrats.

6) In a command economy, goods and services are allocated on the basis of A) the willingness and ability of an individual to pay.
B) the need of an individual.
C) the wants of individuals.
D) what bureaucrats think the allocation should be.
E) the political power of individuals.

7) An economic system in which the state owns a major share of productive resources, except labor, is called A) capitalism.
B) communism.
C) socialism.
D) social capitalism.
E) democracy.

8) An economic system in which individuals own the productive resources, is called A) capitalism.
B) communism.
C) socialism.
D) social capitalism.
E) democracy.

9) A market system (Capitalism) is efficient because
A) the government ensures a fair distribution of goods and services. B) markets are not only efficient but fair.
C) wicked capitalists only care about profits, and this requires efficiency. D) producers seeking profits and consumers seeking their own self interest move goods from higher valued uses to lower valued uses. E) consumers and producers seeking their own self interest move resources and goods from lower valued uses to higher valued uses.

10) In a price system, inefficient firms
A) will make adequate profits.
B) will be rewarded by government subsidies.
C) are usually involved in the production of demerit goods.
D) are always supported by government.
E) will eventually be forced out of business.
11) In considering economic profit in a market economy, it is correct to state that A) there should never be any economic profit.
B) profit is evil exploitation of labor by capitalists.
C) profit performs an important function in allocating resources to where they are...
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