A+ Answers of the following Questions

1. The main reason producers make things is to
A. overcome shortages.
B. make a profit on them.
C. help the economy.
D. pay taxes.

2. Buildings, machines, and tools are all examples of
A. capital.
B. wants.
C. opportunity.
D. services.

3. In a market economy, producers can set any price they like for a product they offer. Also, consumers can decide whether or not to pay that price. This two-way street is called
A. free competition.
B. freedom of exchange.
C. freedom of expression.
D. free enterprise.

4. Adam Smith wrote a book about
A. how market economies work.
B. the circular flow model of money.
C. balancing opportunity costs.
D. the market clearing price.

5. According to the circular flow model of the economy, a person's job in a shoe factory is within the
_______ market.
A. service
B. resource
C. consumer
D. product

6. Which one of the following statements reflects a characteristic of socialism?
A. Individuals who work hard can become very rich.
B. Individuals control all of the businesses.
C. Public ownership protects workers from bad working conditions.
D. People must work at the jobs to which they're assigned.

7. What kind of economy does the United States have?
A. Command
B. Traditional
C. Market
D. Mixed

8. Which one of the following resources is considered as capital?
A. Soil
B. Machinery
C. Employees
D. Water

9. Which of the following ideas did Karl Marx believe?
A. Factory owners should have most of the wealth.
B. Workers shouldn't use force to get what they wanted.
C. Workers and owners would cooperate for profit.
D. Workers should run the factories to make their lives better.

10. The key feature of a market system is
A. supply.
B. competition.
C. profit.
D. demand.

11. When you do something for someone else—like raking a lawn—you're
A. providing a good.
B. providing a service.
C. developing resources.
D. preventing scarcity.

12. Your text explains that profit and competition work together because
A. without competition no one could make a profit.
B. profit is another word for competition.
C. producers always gain from competition.
D. producers compete with each other for higher profits.

13. Adam Smith said that each person makes decisions based upon
A. freedom of exchange.
B. the product market.
C. self-interest.
D. supply and demand.

14. Which of the following statements about competition is true?
A. Competition keeps producers from charging prices that are too high.
B. Competition only works in a resource market, not a product market.
C. Competition guarantees a profit for each competitor.
D. Competition is based upon a surplus of goods and services.

15. The means by which goods and services are bought and sold freely is known as a
A. market.
B. producer.
C. consumer.
D. shopping center.

16. According to the laws of supply and demand, which one of the following statements is true?
A. The higher the price, the more goods a producer will make.
B. As the price of an item increases, the more people will buy.
C. The lower the price, the more goods a producer will make.
D. As the price of an item decreases, the less people will buy.

17. Which one of these basic economic activities would you expect in a shop that installs car mufflers?
A. Assembling raw materials
B. Providing services
C. Distributing resources
D. Manufacturing

18. Which of the following statements is true for a capitalist economy?
A. It's not practiced in the United States.
B. The factors of production are owned mostly by the people.
C. The government controls most of the economy.
D. Most of the businesses are owned by the government.

19. Consumers create a demand for something by
A. wanting it.
B. saving for it.
C. buying it.
D. needing it.

20. At a price of $62.00, people are buying all of the microwave ovens produced at the MZ factory. In this
case, $62.00 is called the _______ price.
A. market clearing
B. steady market
C. shortage market
D. fixed market

21. Occasionally, companies engage in important investing and financing activities which do not affect cash. If the amount of the transaction is significant, how should it be disclosed when financial statements are prepared?
Answer
A. In a separate section in the cash flow statement with a corresponding zero balance.
B. In investing activities.
C. In a note to the financial statements or in a supplemental schedule.
D. In both investing and financing activities.

22. Mack Company's cash flows showed an inflow of $15,000 from Operations, and inflow of $70,000 from Investing, and and outflow of $50,000 from Financing. The most likely explanation is:
Answer
A. using cash from operations and selling longterm assets to pay back debt
B. using cash from operations and borrowing to purchase longterm assets
C. using its profits to expand growth
D. using cash from investors to provide for operations

23. Bert's cash flows showed a cash inflow of $60,000 from operations, a cash outflow of $125,000 from investing, and a cash inflow of $115,000 from financing. The most likely reason is:
Answer
A. using cash from operations and selling longterm assets to pay back debt
B. using cash from operations and borrowing to purchase longterm assets
C. using its profits to expand growth
D. using cash from investors to provide for operations