Chapter 2/Economic Systems

Each society determines who will consume what is produced based on? A. its unique combination of social values and goals B. the amount of factor payments C. its needs and wants D. economic equity

A

In a socialist country? A. central planning is unnecessary B. the government often owns major industries, such as utilities C. an authoritarian government controls the economy D. economic equality is not important

A

To sell state-run firms to individuals is to? A. privatize. B. individualize. C. collectivize. D. remarket.

A China is selling more of its state-owned firms to individuals and private firms.

According to Adam Smith, what are the two factors that regulate a marketplace? A. competition and self-interest B. elected officials and voters C. the size of the town and the number of customers D. natural resources and manufacturing

A Competition regulates prices; self-interest regulates kinds and amounts of goods and services produced.

Government programs that protect people experiencing unfavorable economic conditions are? A. essential to a market economy. B. factor payments. C. a command economy. D. a safety net.

D Most countries provide some kinds of economic assistance for the elderly, the very young, the poor, and the unemployed.

What do a farmers' market, a sporting goods store, the New York Stock Exchange, and the sign you posted on your community bulletin board advertising baby-sitting services have in common?

they are all markets

Authoritarian means? A. requiring strict obedience to an authority, such as a dictator. B. ruling authority is granted to individuals by the government. C. requiring acknowledgment of authorship. D. ruling by aristocracy.

A Dictatorship governments usually spend much of their budgets in maintaining a large army to ensure obedience at the expense of domestic programs that would help the people.

In a centrally planned economy, the three key economic questions are answered by the? A. central government alone. B. central government with input from industry. C. marketplace alone. D. marketplace with some government involvement.

A In a centrally planned economy, nearly all businesses are owned by the central government, nearly all production is planned by the central government, and nearly all goods and services are distributed by the central government.

Why do markets exist? A. because people are not self-sufficient and need goods and services produced by others B. because people are naturally competitive C. because everyone enjoys trade and business D. because most people are entrepreneurial

A Markets exist because no one is self-sufficient.

Something, such as a reward or bonus, that encourages people to behave in a certain way could be called? A. an incentive. B. self-interest. C. competition. D. laissez faire.

A Product manufacturers use incentives, such as coupons, to get consumers to buy their products.

Which of the following is an example of competition in the marketplace? A. A small town has only two grocery stores, which are located one block away from each other. B. Two neighbors buy the same model of automobile. C. Two farms are separated by a stream that provides water for the cattle raised on each farm. D. Two high schools have excellent football teams.

A Both grocery stores compete for the business of consumers in the town

Communism is a(n)? A. political system characterized by a centrally planned economy with all economic and political power resting in the hands of the central government. B. social and political philosophy whose chief economic goals include economic efficiency and economic growth and innovation. C. political system in which power rests in the hands of the people. D. economic system based on free enterprise.

A Communist governments decide what and how much industries and farms will produce.

A mixed economy is? A. a market-based, economic system based on free enterprise with some government involvement. B. an economic system in which the government regulates all prices, production, and products. C. exactly the same as a centrally planned economy. D. the exact opposite of a free enterprise system.

A Most modern economies rely on government to supply only those services that are economically impractical for the market to handle, such as national defense and education. Market economies are the result of free enterprise.

Laissez faire is? A. the doctrine that states that government generally should not intervene in the marketplace. B. a period of change in which an economy moves away from a centrally planned economy toward a market-based system. C. a social and political philosophy characterized by its fair distribution of wealth. D. a philosophy that states that government should control the marketplace.

A The doctrine of laissez faire has some limits because no marketplace can satisfy all of a society's needs and wants.

Why do governments fulfill some of society's needs, such as education, health care, and mass transit? A. so that all members of the society can participate B. so that services that can not be afforded by the private sector are made available. C. because those needs are always fulfilled in a centrally planned economy D. because individuals and companies are not affected by those needs

A The marketplace cannot meet all the needs and wants of all its members.

To improve its standard of living, a nation's economy must? A. remain stable B. growth through innovation C. reach economic equity D. allow the central government to make economic decisions

B

Which of the following is an advantage of a centrally planned economy? A. the system's bureacracies are small and flexible B. the system can work quickly to accomplish specific goals C. innovation is well rewarded D. consumers' needs are well met

B

What is one benefit of a centrally planned economy? A. it allows entrepreneurs to function freely B. it provides a jumpstart to some industries C. it offers lots of incentives for workers D. it produces more food

B An infusion of money from the government (or another kind of investor for that matter) can help most businesses begin, but then a business needs the creative thinking and technology of its workers to grow it.

What is a major disadvantage of a centrally planned economy? A. It offers too many choices for consumers. B. It cannot meet consumers' needs and wants. C. It has no control over which goods and services are provided. D. Its military forces are too weak to be effective.

B By definition, a centrally planned economy has no input from consumers as to their needs and wants; everything is planned by the government.

In the Soviet Union, a collective was a? A. group of consumers who buy products directly from the government. B. large farm leased from the state to groups of peasant farmers. C. grocery store owned by its members. D. group of farmers who work on a farm owned by a private firm or family.

B Collectives were based on the idea that group farming would be more efficient, but under the Communist system of established quotas and distribution, individuals had little incentive to produce more or better crops.

How a society answers the key economic questions primarily depends on? A. how many resources it has available. B. a society's goals and values. C. the underutilization of resources. D. how it combines factors of production.

B Each society balances economic goals such as economic efficiency and freedom against others such as economic security and equity.

Which of the following goods is provided by the U.S. government rather than by individuals? A. food B. roads C. steel D. computers

B It's impractical for the marketplace to provide for roads, so that role is fulfilled by the government.

The method used by a society to produce and distribute goods and services is? A. production curve. B. an economic system. C. an opportunity cost. D. the standard of living.

B Several different kinds of economic systems have evolved in response to the problem of scarcity, which is the problem that forces nations to answer difficult economic questions.

A centrally planned economy is? A. always the most efficient economic system. B. an economic system in which the government makes all the decisions about production and consumption of goods and services. C. a form of free enterprise with minimal government involvement. D. an economic system that has no government involvement.

B A centrally planned economy is run by a central government and does not allow for free enterprise.

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? A. United Kingdom B. Hong Kong C. South Africa D. North Korea

B Hong Kong has very few limits imposed by government.

A household is a person or a group of people who live in the same residence. In economics, households are also? A. considered to be firms that product products. B. consumers of goods and services. C. involved in specialization. D. called "the invisible hand."

B In a free market, households are consumers because they exchange the factors of production for the goods and services provided by firms.

Property owned by individuals or companies, not by the government or the people, as a whole is? A. public property. B. private property. C. mixed property. D. communal property.

B The 5th amendment to the U.S. Constitution provides protection against the government seizing private property without proper compensation.

Government intervention in a modern economy is useful because? A. the needs and wants of modern society are always met by the marketplace B. the mrketplace has many incentives to create public goods such as parks and libraries C. governments are able to provide some goods and services that the marketplace has no incentive to produce D. the marketplace provides all of its own laws

C

Why do people need to buy and sell goods and services? A. people need to buy and sell goods to make a profit B. people buy and sell to maintain a competitive society C. no one is self sufficient D. people need to provide the market with goods and services

C

Who answers the key economic questions in a centrally planned economy? A. consumers B. firms C. government D. households

C Again, centrally planned or command economies are commanded by central governments to and produce specific goods and services in specific amounts.

The struggle among producers for consumer dollars is? A. incentive. B. self-interest. C. competition. D. laissez faire.

C Competition keeps prices on popular and needed goods and services from rising too high as to be out of reach for average consumers.

What is the purpose of a firm? A. to provide competition for households B. to use natural resources wisely C. to produce goods and services D. to direct a centrally planned economy

C Firms supply households with the things they want and need in the form of goods and services.

Which of the following is NOT a main priority of the U.S. government? A. creating laws that protect property rights and enforce contracts B. providing for national defense C. subsidizing businesses to keep product prices low D. providing education for all children

C Government does subsidize some businesses but not for the reason of keeping product prices low; mostly governments subsidize businesses because they provide a public need that otherwise might not be met.

The invisible hand is? A. the concentration of the productive efforts of individuals and firms on a limited number of activities. B. an organization that uses resources to produce a product. C. a term economists use to describe the self-regulating nature of the marketplace. D. the market in which households purchase the goods and services that firms produce.

C What consumers buy in the marketplace guides manufacturers to what to produce

Who owns the land and the capital in a centrally planned economy? A. consumers B. firms C. government D. households

C Centrally planned or command economies are commanded by central governments to and produce specific goods and services in specific amounts.

A Continuum is a? A. historical timeline. B. process to track progress of production. C. range with no clear divisions. D. schedule.

C Countries' economies range on a continuum with totally controlled by government on one end and nearly totally controlled by individuals and privately owned firms on the other.

The income people receive for supplying factors of production, such as land, labor, or capital, are? A. monetary inputs. B. capital investments. C. factor payments. D. receivables.

C Factor payments are the income people recieve for supplying factors of production.

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? A. communism. B. mixed market economy. C. free enterprise. D. free trade.

C The United States' economic system is an example of a free-enterprise system.

What has been mostly responsible for advancing from the agricultural age to the industrial age? A. economic freedom B. government C. innovation D. business

C The advancements from the agricultural age to the industrial age along with the move from the industrial age to the information age are both attributed to innovations in technology.

A social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society is? A. dictatorship. B. authoritarianism. C. socialism. D. sovereignty.

C When the public controls the economy, it can place restrictions on how wealth is distributed.

The United States economy is a mixed economy? A. based on the principle of a traditional economy, but allows some government intervention B. based on the principles of a centrally planned economy, with limited government intervention C. based on the principles of the free market, and allows no government intervention D. based on the principles of the free market, but allows some government intervention

D

What factors create the phenomenon of the "invisible hand?" A. incentives and efficiency B. specialization and efficiency C. competition between firms D. competition and self-interest

D

In which economy do communities generally have a low standard of living? A. market economy B. mixed economy C. industrial economy D. traditional economy

D Inefficient use of resources, which is characteristic of a traditional economy, generally results in a low standard of living.

Consumer sovereignty is? A. the concentration of the productive efforts of individuals and firms on a limited number of activities. B. a person or group of people living off the land. C. a market where consumers purchase goods and services collectively. D. the power of consumers to decide what gets produced.

D Rather than the government directing the kinds and amounts of goods and services produced, consumers guide manufacturers and sellers to produce the products they want and need by what they buy and also by what they don't buy.

Which of the following countries is in transition from a centrally planned economy to a market-based system? A. Singapore B. United States C. France D. China

D With each passing year, China has more privately owned businesses.

Which of the following was NOT a priority of Soviet planners? A. space program B. defense industry C. heavy machinery manufacturing D. providing a variety of luxury items for all consumers

D Central planning in soviet countries caused problems such as poor quality, serious shortages of nonpriority goods and services, and diminishing production.

All of the following are key economic questions that every society must answer? A. Who gets to consume which goods and services? B. How should goods and services be produced? C. What goods and services should be produced? D. Where should goods and services be produced?

D Each system answers the question of the distribution of goods and services based on its unique combination of social values and goals.

Industry that requires a large capital investment and that produces items used in other industries is known as? A. a light industry. B. the auto industry. C. the shipping industry. D. heavy industry.

D Examples of heavy industries include the chemical, steel, and heavy machinery industries.