Chapter 2 Econ

What is a major disadvantage of a centrally planned economy?

It cannot meet consumers' needs and wants.

How does specialization affect an economy?

It prevents duplication of effort.

A mixed economy is

a market-based, economic system based on free enterprise with some government involvement.

Government programs that protect people experiencing unfavorable economic conditions are

a safety net.

How a society answers the key economic questions primarily depends on

a society's goals and values.

The invisible hand is

a term economists use to describe the self-regulating nature of the marketplace.

The doctrine that government should not intervene in the marketplace is called

laissez faire.

In the Soviet Union, a collective was a

large farm leased from the state to groups of peasant farmers.

The free enterprise system of the United States is best described as a

mixed economy with limited government intervention and a great deal of economic freedom.

The former Soviet Union was an example of a communist country where

most economic and political power was controlled by the government.

Communism is a(n)

political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government

Property owned by individuals or companies, not by the government or the people, as a whole is

private property.

To sell state-run firms to individuals is to

privatize.

Which of the following was NOT a priority of Soviet planners?

providing a variety of luxury items for all consumers

A Continuum is a

range with no clear divisions.

Authoritarian means

requiring strict obedience to an authority, such as a dictator.

Which of the following goods is provided by the U.S. government rather than by individuals?

roads

Why do governments fulfill some of society's needs, such as education, health care, and mass transit?

so that all members of the society can participate

A social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout society is called

socialism.

A social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society is

socialism.

. In an economy in transition from central planning to free enterprise, you might expect to see

state firms sold to private individuals or entities.

Which of the following is NOT a main priority of the U.S. government?

subsidizing businesses to keep product prices low

The free market economist Adam Smith is NOT known for

the circular flow model of a mixed economy.

Laissez faire is

the doctrine that states that government generally should not intervene in the marketplace.

The circular flow model shows

the interactions between households and businesses in the free market.

The self-regulating nature of the marketplace is called

the invisible hand.

Consumer sovereignty is

the power of consumers to decide what gets produced.

Socialists believe economic equality is only possible if

the public controls the economy.

What is the purpose of a firm?

to produce goods and services

In which economy do communities generally have a low standard of living?

traditional economy

Which of the following is an example of competition in the marketplace?

A small town has only two grocery stores, which are located one block away from each other.

With "centrally planned" on the left and "free market" on the right, which of the following countries' economic systems would be farthest to the right on the Continuum of Mixed Economies?

Hong Kong

Which statement applies to all centrally-planned economies?

The government makes all important economic decisions.

Which is a key economic question faced by all countries?

What goods and services should be produced?

All of the following are key economic questions that every society must answer, except:

Where should goods and services be produced?

Which of the following countries is in transition from a centrally planned economy to a market-based system?

China

Which of the following countries is the most extreme example of a centrally-planned economy?

North Korea

In the study of economics, the definition of a market is

an arrangement that allows buyers and sellers to exchange things.

The method used by a society to produce and distribute goods and services is

an economic system

. A centrally planned economy is

an economic system in which the government makes all the decisions about production and consumption of goods and services.

Something, such as a reward or bonus, that encourages people to behave in a certain way could be called

an incentive.

Why do markets exist?

because people are not self-sufficient and need goods and services produced by others

In a centrally planned economy, the three key economic questions are answered by the

central government alone.

The government decides which goods and services will be produced in a

command economy.

According to Adam Smith, what are the two factors that regulate a marketplace?

competition and self-interest

The struggle among producers for consumer dollars is

competition.

A household is a person or a group of people who live in the same residence. In economics, households are also

consumers of goods and services.

In a traditional economy, economic decisions are based largely on

custom.

Which economic goals are difficult to achieve in a pure market system?

equity and security

Markets allow us to

exchange things we have for things we want or need.

In return for supplying the factors of production—land, labor, or capital—people receive

factor payments.

The income people receive for supplying factors of production, such as land, labor, or capital, are

factor payments.

An economic system characterized by private or corporate ownership of capital goods; investments that are determined by private decision rather than by state control; and determined in a free market is

free enterprise.

Competition and self-interest are two important forces in

free market economies.

Who answers the key economic questions in a centrally planned economy?

government

Who owns the land and the capital in a centrally planned economy?

government

Industry that requires a large capital investment and that produces items used in other industries is known as

heavy industry.

The circular flow model of a mixed economy shows

how government interacts with households and firms in the product and factor markets.

What has been mostly responsible for advancing from the agricultural age to the industrial age?

innovation

What is one benefit of a centrally planned economy?

it provides a jumpstart to some industries