SS141 Macro-Economics Professor Patrick Yanez
Study Questions for Chapter 4 - Set 2
These questions are to facilitate your discussion groups and/or tutoring sessions. Answers are listed at the end of this
file. Since our class time is limited to introducing new topics, we do not have time to review these questions in class;
please use your discussion group and/or tutoring session to review these questions.
Consumer sovereignty; invisible hand
1. The market system's answer to the fundamental question "What will be produced?" is essentially:
A) "Goods and services that are profitable."
B) "Low cost goods and services."
C) "Goods and service that can be produced using round-about production."
D) "Goods and services that possess lasting value."
2. The market system's answer to the fundamental question "How will the goods and services be
produced?" is essentially:
A) "With as much machinery as possible."
B) "Using the latest technology."
C) "By exploiting labor."
D) "At least-cost production."
3. The market system's answer to the fundamental question "Who will get the goods and services?"
is essentially:
A) "Those willing and able to pay for them."
B) "Those who physically produced them."
C) "Those who most need them."
D) "Those who get utility from them."
4. The market system's answer to the fundamental question "How will the system accommodate
change?" is essentially:
A) "Through government leadership and direction."
B) "Through the guiding function of prices and the incentive function of profits."
C) "Through training and retraining programs."
D) "Through random trial and error."
5. The advent of DVDs threatens to eventually demolish the market for videocassettes. This is an
example of:
A) creative destruction.
B) derived demand.
C) capital accumulation.
D) the difference between normal and economic profits.
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