PrQ2: Practice Quiz - Ch. 2: Markets and Economies
Question 1
Pawsabilities is a dog grooming service fully owned by Clark, Art, and Fred. Which of the following statements does not describe a downside of this business form?
A. It faces significant paperwork requirements to start.
B. Each owner is liable for legal claims against the firm.
C. It can use loans only to raise money to expand.
D. Each owner is personally liable for debts created by the firm.
Answer
A. It faces significant paperwork requirements to start.Question 2
Twelve cookies are to be distributed between two friends. Which of the following allocations would be most efficient?
A. The cookies are distributed through a random lottery.
B. Each person gets six cookies.
C. One person gets 12 cookies, and the other get no cookies.
D. Most cookies go the indvividual with the strongest desire for cookies, while the remaining cookies go to the other individual.
Answer
D. Most cookies go the indvividual with the strongest desire for cookies, while the remaining cookies go to the other individual.Question 3
A potential disadvantage of a market economy is that:
A. the rewards of production are distributed equitably, which might reduce incentives to produce.
B. efficient methods of production might continue because that is the way things have always been done.
C. general assemblies make most economic decisions.
D. a pure market economy may not provide many goods that are consumed collectively.
Answer
D. a pure market economy may not provide many goods that are consumed collectively.Question 4
Alisa buys a 3D printer for the coworking space that she operates. Which category of the four factors of production does this printer fall under?
A. entrepreneurship
B. land
C. capital
D. labor
Answer
C. capitalQuestion 5
Which of the following is a key distinction between corporations and limited liability companies (LLCs)?
A. Corporations can issue stock, but LLCs cannot.
B. Corporations shield owners from legal liabilities, but LLCs do not.
C. Corporations can borrow money, but LLCs cannot.
D. Corporations are distinct legal entities for the purpose of taxes, but LLCs are not.
Answer
A. Corporations can issue stock, but LLCs cannot.Question 6
Goods, services, and resources are allocated based on price; those individuals who value them most, all else equal, will pay the corresponding prices. This best describes what economic system?
A. communism
B. a market economy
C. a traditional economy
D. socialism
Answer
B. a market economyQuestion 7
Most economies in the world are:
A. mixed.
B. market.
C. command.
D. traditional.
Answer
A. mixed.Question 8
Which of the following is an advantage of communism?
A. There is a much greater emphasis on advertising under communism than under other economic systems.
B. Because all firms are owned by the same entity, research and development can be shared by all producers.
C. Prices send producers and consumers important signals about the values of resources and output.
D. Shared income increases incentives to produce.
Answer
B. Because all firms are owned by the same entity, research and development can be shared by all producers.Question 9
When power plants switch from using coal as a fuel for electricity generation to using less expensive natural gas as a fuel, which of the fundamental economic questions is addressed?
A. What to produce
B. Where to produce
C. How to produce
D. For whom to produce
Answer
C. How to produceQuestion 10
Economists evaluate an allocation of resources as _____ if no alternative allocation could make some people better off without making other people worse off.
A. egalitarian
B. efficient
C. fair
D. unjust