Question : 2.2 Economic Systems and the Role of Government 1) An economy : 1381039

2.2 Economic Systems and the Role of Government

1) An economy in which a central authority draws up a plan that establishes what will be produced and when, sets production goals, and makes rules for distribution is a

A) free market economy.

B) laissez-faire economy.

C) public goods economy.

D) command economy.

2) An economy in which individual people and firms pursue their own self-interest without any central direction or regulation is a(n)

A) command economy.

B) laissez-faire economy.

C) invisible-hand economy.

D) private-sector economy.

3) Which of the following statements is FALSE?

A) Many planned economies have not fared very well in recent years; many of these economies have almost completely collapsed.

B) Command economies operate the most efficiently because the government makes all the production decisions.

C) In command economies, consumers still exercise choice.

D) In a command economy, the government answers the questions of what to produce, how to produce it, and how to distribute it.

4) Which of the following is an element of a command economy?

A) The market decides distribution.

B) The means of production are privately owned.

C) Production decisions are centralized.

D) The market decides what will be produced.

5) Which of the following statements is NOT true for a command economy?

A) Consumers have some choices concerning what they buy.

B) The government decides what is produced.

C) The amount of a good supplied always equals the amount of the good demanded.

D) The state decides how to distribute what is produced.

6) In a laissez-faire economy, ________ what gets produced, how it is produced, and who gets it.

A) the behavior of buyers and sellers determines

B) the central government authority determines

C) firms but not consumers determine

D) consumers but not firms determine

7) An institution through which buyers and sellers interact and engage in exchange is

A) a central authority.

B) “laissez-faire.”

C) a market.

D) a production frontier.

8) Which of the following is NOT true of a market economy?

A) In its pure form, it is also known as a laissez-faire economy.

B) Decisions are regulated by a central agency.

C) The interaction between buyers and sellers answers the basic economic questions of what gets produced, how it gets produced, and who gets it.

D) It relies on millions of individual economic decisions to determine economic outcomes.

9) Consumer sovereignty

A) is dependent on profits.

B) is the idea that consumers can buy whatever they want to.

C) is the idea that consumers determine what is produced in the economy through their demands.

D) is only possible in a monarchy.

10) The idea that consumers ultimately dictate what will be produced by choosing what to purchase is known as

A) laissez-faire.

B) the economic problem.

C) centralized decision making.

D) consumer sovereignty.

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July 1, 2023

21. The percentage-of-sales procedure arises from the idea that uncollectible amounts will vary with the volume of credit business. The firm estimates the appropriate percentage by studying its own experience or by inquiring into the experience of similar firms. Default rates generally fall within the range of .01% to .02% of credit sales.

22. The percentage-of-completion method measures the proportion of total work carried out during the accounting period either from engineers' estimates of the degree of completion or from the ratio of costs incurred to date to the total costs expected for the entire contract.

23. A common-size income statement expresses each expense and net income as a percentage of
A. assets.
B. revenues.
C. liabilities.
D. expenses.
E. shareholders’ equity.

24. If the firm has received a promise of payment but cannot measure this promise with reasonable reliability,
A. U.S. GAAP would permit revenue to be recognized, but IFRS would not permit revenue to be recognized.
B. U.S. GAAP would not permit revenue to be recognized, but IFRS would permit revenue to be recognized.
C. neither U.S. GAAP nor IFRS would permit revenue to be recognized.
D. U.S. GAAP and IFRS would permit revenue to be recognized.
E. none of the above

25. Which section includes income derived from a firm’s primary business activities as well as from activities peripherally related to operations? (The firm expects these sources of earnings to continue.)
A. income from continuing operations
B. income, gains, and losses from discontinued operations
C. extraordinary gains and losses
D. retained earnings
E. paid-in-capital

26. Operating risks
A. include variability in sales from changing economic conditions (cyclicality risk).
B. include variability in sales from short product life cycles (because of technological change or changes in consumer taste).
C. include variability of earnings that arises when the firm has a high proportion of fixed costs that do not change as sales change.
D. Answers a, b, and c are correct.
E. None of these answer choices is correct.

27. Ulrich Co. sells an asset to a buyer for a total sales price of $6,000 with a payment schedule of $2,000 in year 1, $2,000 in year 2, and $2,000 in year 3. The cost of the asset is $5,000. Under the cost-recovery-first method, what amount of net profit is recognized in year 3?
A. $2,000
B. $1,000
C. $666.67
D. $333.33
E. $0

28. Which of the following is true regarding income recognition?
A. The seller must have substantially performed its obligations to the customer (for example, by transferring ownership of goods to the customer).
B. The seller must have obtained an asset from the customer that it can reliably measure. If the asset is not cash, the seller must be reasonably certain of converting it into cash.
C. The firm recognizes expenses when it consumes assets.
D. If an event or transaction leads to the recognition of revenue, the firm matches the consumption of any assets (the expense), in time, with the revenue recognized.
E. all of the above

29. Cowden Properties

Cowden Properties sold a condominium to Ms. Roberts for $90,000. Cowden originally acquired the condo at a cost of $40,000 and made improvements to the unit totaling $20,000. The contract for sale required Ms. Roberts to pay the $90,000 as follows: