In market systems, the main way that valuable resources are transferred from hou

Question

In market systems, the main way that valuable resources are transferred from households to firms is:

Question 1 options:

through direct barter exchange of labor for goods and services.

through government sponsored distribution such as in providing public K-12 schooling.

through markets based on money payments.

a circular flow where the firms provide resources to households and the households reciprocate by providing finished goods and services to firms.

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Question 2 (1 point)

The Seller's Reservation Price is:

Question 2 options:

the minimum price a seller will accept and still voluntarily transfer the good or service to the buyer.

the maximum price the seller things he can charge before he has moral reservations about what he is doing.

the price that the Bureau of Indian Affairs charges for goods and services on Indian Reservations in the U.S..

the down-payment amount necessary to get a seller to reserve the product for a particular buyer.

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Question 3 (1 point)

The Buyer's Reservation Price is:

Question 3 options:

the minimum price necessary to reserve the item for later purchase.

the maximum price that a buyer would be willing to pay for an item.

the market equilibrium price, and therefore is the same for all buyers.

the minimum price that a buyer would be willing to pay for an item.

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Question 4 (1 point)

The Bargaining Range is:

Question 4 options:

is the approved range of prices that firms may charge in capitalist systems to prevent firms from gouging customers.

is the specific price agreed to by buyer and seller out of all possible prices that arose during the bargaining process.

the difference between the buyer's reservation price and the seller's reservation price. If this difference is negative, a voluntary exchange can take place.

the difference between the buyer's reservation price and the seller's reservation price. If this difference is positive, a voluntary exchange can take place.

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Question 5 (1 point)

When buyers and sellers interact in free-market systems,

Question 5 options:

they are interacting in a Negative Sum environment where the gains of the sellers come from exploiting the buyers.

they are interacting in a Positive Sum environment. This permits both buyer and seller to "win" when a transaction takes place.

the end result only benefits the buyers since they get a price below their reservation price.

the end result only benefits the sellers since they get a price above their reservation price.

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Question 6 (1 point)

As understood in economics, the Law of Demand:

Question 6 options:

refers to the principle that people prefer to purchase more goods when the price falls, and purchase fewer goods when the price rises.

refers to the principle that people prefer to purchase fewer goods when the price falls, and purchase more goods when the price rises.

only applies to people raised in capitalist countries. People raised in other cultures do no "obey" the law of demand.

is a law embedded in the constitution and therefore applicable in all 50 states.

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Question 7 (1 point)

The Law of Demand:

Question 7 options:

is based on the behavior of the New Soviet Man that Marxists believed would come into existence after socialism was up and running.

exists due to self-interest, and therefore must be immoral.

underlies the Supply curve and explains its upward slope.

underlies the Demand Curve and explains its downward slope.

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Question 8 (1 point)

The Law of Supply:

Question 8 options:

is also based on the law of the Constitution. The Constitution of the U.S. makes the law of supply mandatory in all 50 states.

is based on the law of increasing cost. As production in an industry expands, the cost of resources increases, leading to higher costs of production.

postulates that in a world of self-interest, business people will only increase their production if prices are falling.

is based on the theory of Economic Man, or homo economicus. Economic man responds to higher prices by reducing production.

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Question 9 (1 point)

In Capitalist Systems, the profits of the capitalist class:

Question 9 options:

belong to everyone in society. Therefore, government has the right and the duty to tax these profits to provide goods and services for the poor.

belong to the capitalists as a residual claim on the revenue of firms. This means that the capitalist gets paid first before all other contractual obligations are met since the capitalist is the owner.

belong to the capitalists as a residual claim on the revenue of firms. This means that the capitalist gets paid only after all other contractual obligations are met first.

are calculated by subtracting profit from total revenue, plus total cost.

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Question 10 (1 point)

In pure Capitalism:

Question 10 options:

firms may either make a profit or suffer losses. The profits are variable and not guaranteed.

the profits are guaranteed for Entrepreneurs, but not for Capitalists. Entrepreneurs are guaranteed a fixed percentage of profit to encourage them to start new businesses.

the profits of the capitalist is guaranteed by law just like the wages paid to workers. Each gets what he or she has contracted for whether a capitalist or a worker.

the entrepreneur is paid a wage like other workers. As long as the work done by the entrepreneur meets the contractual standards set by the capitalist, the entrepreneur must be paid.

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Question 11 (1 point)

When a market reaches its equilibrium price:

Question 11 options:

shortages and surpluses are common. This is why society must rely on command planning to get the amounts consumers desire to equal the amounts firms produce.

the prices paid by the consumer are higher than they should be, triggering a shortage.

the prices paid by the consumer are higher than they should be, triggering a surplus.

the total quantity of the good demanded by consumers equals the total quantity supplied by firms.

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Question 12 (1 point)

The market equilibrium price:

Question 12 options:

seldom lands within the bargaining range of the consumers who purchase a good or service. This is why Marx supported the entrepreneurs against the capitalists.

must always be within the bargaining range of all market participants who voluntarily enter into a transaction.

leaves both buyers and sellers worse off since the market price is seldom within the bargaining range of the participants.

leads to huge swings between surpluses and shortages.

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Question 13 (1 point)

Once a market equilibrium price has been determined:

Question 13 options:

the price will remain the same unless market demand changes or market supply changes due to changing market forces.

it cannot be changed due to changed market conditions. Therefore, it is necessary for the government to update prices once a year to reflect new economic realities.

it will change randomly, even when there has been no change in market conditions.

by the government, it can only be changed by a vote of the capitalist class in congress.

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Question 14 (1 point)

Bankruptcy:

Question 14 options:

is one of the major flaws of the capitalist system. Since a government can always subsidize a firm an keep it going indefinitely, there is never a good reason to let a firm fail and lay off its workers.

only applies to individuals. In the Capitalist system, the capitalists are guaranteed a profit and therefore cannot go bankrupt.

is one of the major advantages of a capitalist system compared to a socialist system because it provides a mechanism for failed firm to be "recycled" and replaced by more successful ones.

or the threat of bankruptcy, generally impedes a firm's success. Without the threat of bankruptcy most firms would be much more interested in finding new markets and running their firms more efficiently.

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Question 15 (1 point)

When Joseph Schumpeter coined the term, "creative destruction" he:

Question 15 options:

was referring to how rioters make a city more creative by destroying businesses and stores.

was referring to the process by which capitalist firms physically destroy each other's factories in order to create larger markets for themselves.

was referring to the fact that the invention of new products like the personal computer destroy old industries producing products like typewriters as consumers move their purchases over to the new industry.

only emphasized its positive character in building new industries. He failed to understand how the negative aspects might affect workers in declining industries.

A)

through direct barter exchange of labor for goods and services.

B)

through government sponsored distribution such as in providing public K-12 schooling.

C)

through markets based on money payments.

D)

a circular flow where the firms provide resources to households and the households reciprocate by providing finished goods and services to firms.

Explanation / Answer

1) In a market system, valuable resources transferred from household to firm is through monetary payment. Option c is correct.

2) The seller's reservation price is the minimum price at which they are willing to sell. The first option(a) is correct.

3) The buyer's reservation price is the maximum price at which they are willing to buy. the second option is correct.

4) The bargaining range is the difference between the reservation price of buyers and sellers. And if the difference is positive then the exchange can take place. The fourth option is correct.

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