Chapter 2: Economic Systems and Decision Making

market

mechanism through which buyers and sellers of an economic product or service come together

communism

economic and political system in which factors of production are owned and directed by the state

collectivization

forced common ownership of factors of production

Which of the following is a feature of a command economy that distinguishes it from a socialist economy? A)All production is managed by the government. B)All economic decisions are made by the free market. C)All economic decisions are based on custom and habit. D)Some degree of private ownership and activity is allowed.

A) All production is managed by the government.

Which of these helps explain why mixed economies develop? A)Nations evolve, shed policies that don't work, and adopt ones that do. B)People are seldom exposed to the ideas and technologies of other cultures. C)Government control of an economy tends to make a nation more prosperous. D)Government control of an economy leads to a diversity of economic approaches.

A) Nations evolve, shed policies that don't work, and adopt ones that do.

In which of these systems is the government most likely to provide people with goods and services they could not otherwise afford? A)market economy B)socialist economy C)traditional economy D)free-enterprise economy

B) socialist economy

Which of these statements describes a disadvantage of a traditional economy? A)Everyone knows his or her role. B)New ways of doing things are encouraged. C)New ways of doing things are discouraged. D)Difficult economic decisions are made by the state.

C) New ways of doing things are discouraged.

In a transitioning economy, why would privatization tend to raise a nation's overall standard of living? A)People are less likely to assume the risks of entrepreneurship. B)It places the means of production in the hands of the government. C)People are more likely to be productive when it benefits them personally. D)It places a nation's ruling class in a position to administer the economy efficiently.

C) People are more likely to be productive when it benefits them personally.

Which of the following is a cause of struggle in the process of privatization? A)People must adjust to government control of their economy. B)People must decide how best to get along without a free market. C)People must adjust to the costs and risks that are part of capitalism. D)People must become used to no longer owning their own homes and businesses.

C) People must adjust to the costs and risks that are part of capitalism.

Which of these economic systems have the least in common? A)market economy and capitalism B)command economy and socialism C)command economy and capitalism D)free-enterprise economy and market economy

C) command economy and capitalism

Which of these is the most striking example of the costs and risks of pure capitalism? A)the Gosplan B)the Five-Year-Plan C)the Great Depression D)the Great Leap Forward

C) the Great Depression

Which of these statements is descriptive of a market economy? A)Most media is state-owned and operated. B)The government determines what is produced and by whom. C)Major economic decisions are made for individuals, not by them. D)Major economic decisions are made by individuals, not for them.

D) Major economic decisions are made by individuals, not for them.

Which of these countries has an economy most similar to that of the former Soviet Union? A)Sweden B)Norway C)South Korea D)North Korea

D) North Korea

voucher

certificate used to purchase government-owned property during privatization

population density

number of people per square mile of land area

capital-intensive

requiring large amounts of investment in equipment in relation to labor

European Union (EU)

successor of the European Coal and Steel Community, established in 1993

socialism

system in which government owns and controls some factors of production

mixed economy

system that has some combination of traditional, command, and market economies

Great Depression

worst period of economic decline in U.S. history, lasting from approximately 1929 to 1939