Economics topic 2 lesson 1-3 test

Which of the following represents a difference between socialism and communism?

Socialism may allow some free market practices communism does not

This illustration shows two different approaches to the question of how to combine the factors of production. Analyze Information Which approach is most efficient? Explain your answer.

The approach with modern technology is most efficient because there's less people working, better technology, and more bushels of wheat are being picked up.

The idea of the invisible hand lies at the heart of free market thinking. Analyze Political Cartoons: What is the attitude of the corporate leaders in this cartoon toward the invisible hand?

The attitude of the corporate leaders toward the invisible hand is curiosity and willingness to work more efficiently to achieve it. Self-interest is the driving force that leads to efficiency.

Based on what Karl Marx failed to understand, why would these workers shown in the picture work in a factory?

The conditions were obviously better than the ones they dealt with in farms and plantations. They also had access to better technology.

Which economic goal reflects the desire of individuals to make their own choices about owning property or becoming entrepreneurs?

freedom

Which policy change was partly responsible for economic growth in China starting in the 1970s?

giving farmers the chance to own land

Who makes most basic decisions in a centrally planned economy?

government

Which of the following is typical of a centrally planned economy?

government control

What are the three basic economic questions all societies must answer?

What goods and services should be produced, how should they be produced, and who will consume them?

The distribution of income received in the form of rent, wages, or interest is the main factor that determines

Who consumes goods and services

What is one reason centrally planned economies tend not to be efficient?

Workers lack the incentive to work harder.

Why does a free market economy result in the availability of a wide variety of goods and services?

because producers have incentives to meet consumers' desires for variety

How were the Soviet Union and communist China similar?

both suffered from severe economic problems as a result of central planning

How is a society's economic system defined?

by how it answers the three basic economic questions

How does innovation promote economic growth?

by introducing new goods and services that create new markets

In a free market system, the concept of consumer sovereignty means that

consumers have the power to decide through their actions what goods and services get produced

Key advantages of free market economic systems include

economic efficiency, economic freedom, economic growth, and variety of goods

An economy that maximizes its scarce resources and can deliver the right goods in the right quantity to the right people at the right price has achieved which economic goal?

efficiency

Which basic economic goal is most easily achieved in a traditional economy?

equity

What distinguishes an authoritarian government from a democratic one?

it requires strict obedience from its citizens

What is a disadvantage of central planning?

lack of economic efficiency

Which of the following is an explanation of what Adam Smith called the "invisible hand" of the marketplace?

self interest, competition, and incentives promote smoothly running markets

According to the circular flow model of a market economy, firms buy factors of production from households, then

use these factors to produce goods and services

List the economic goals

Freedom Efficiency Security Equity Growth

What type of economy might the hunter shown be a part of?

A traditional economy

In a free market, incentives of all sorts influence individuals to act in their own self-interest. Identify Central Ideas: Use one of the examples from this diagram to explain how the incentive given leads to the response indicated.

An example from the diagram could be how the positive incentive of going to a concert is the goal when studying harder. The negative incentive of getting grounded is the result if grades don't improve.

How did communist China manage to survive when the Soviet Union did not?

China introduced capitalist reforms

China's grain output fell sharply after the start of the Great Leap Forward. Draw Conclusions Based on this evidence, how would you characterize the success of central planning during the Great Leap Forward?

China's command economy was shown to be rather unsuccessful during the Great Leap Forward.

Socialism and communism share key similarities but also have key differences. Draw Conclusions Why do you think communism typically requires an authoritarian government while socialism does not?

Communism requires an authoritarian government because they want to make sure the country does stuff for the government's benefit, they require total loyalty to the state.

What economic goal is shown when Jack Kilby discovered something new?

Growth

Capitalist production . . . develops technology and the combining together of various processes . . . only by sapping the original sources of all wealth—the soil and the laborer. —Karl Marx, The Communist Manifesto Based on this quote, how does Karl Marx feel about capitalism

He hates it, he blames capital for the intense conditions of factories. He's more traditional in the sense of production.

The free market system offers many benefits to producers and consumers. Analyze Charts: Which of the advantages of the free market do you think is most important to producers? Explain your answer.

I think that the advantage of freedom is most important to producers. It allows them to think of anything and produce it in the quality and quantity they want to. It encourages efficiency as well.

What role does competition among producers play in a free market?

It causes firms to produce what consumers want while moderating prices

What does the picture of the apartment complex show about the authoritarian system the Soviet Union was run under?

It showed that citizens were not allowed to choose where they lived.

What does this image of a McDonald's in China show?

It shows that China is introducing free market principles

Under Stalin, the communist Soviet government set ambitious production goals. Identify Central Issues How does this graph represent the concept of central planning?

It shows that the government wanted resources to enhance the military so that they can go and invade other territories. They deterred what goods should be produced.

Today, markets can exist online, where buyers and sellers meet to exchange goods and services. Explain How can a market exist in a place where people do not physically meet?

Markets can exist through ordering stuff online. Markets also exists where people can buy, sell, or exchange virtual items.

Explain how the modern farm is more specialized than the traditional farm. What replaces the human and animal labor in the modern farm?

Modern farms require less people and more advanced technology. It can also produce more crops than a modern farm can.

The circular flow model shows the interaction between households and firms in a free market. Analyze Charts What is the primary item that changes hands in the monetary flow?

Money is the primary item that changes hands in the monetary flow

Where in the circular flow model does a new car on display in an auto dealer's showroom belong?

Product market, physical flow

What economic goal is the soldier showing in this picture?

Security

This farmer specializes in raising one crop, using income from its sale to purchase equipment and other goods. Test Conclusions What evidence can you see that the farmer earns income from the specialized production of one crop?

The evidence I see to this scenario is that the farmer bought a lot of acres of land, has a nice car, and has advanced technological equipment. This was all bought through the income he made out of his sales.

Customers at a Cuban bakery receive their daily ration of bread allowed by the Cuban government. Express Problems Clearly In this situation, who is deciding how much bread is produced by this bakery?

The government is deciding how much bread is produced by this bakery. The woman is used to represent them.

Household income rose between 1976 and 2011 at all five income levels—but not at equal rates. Analyze Graphs Which income group saw the greatest change?

The highest 20%

Societies with command and free market economies answer the basic economic question "What goods and services should be produced?" in different ways. What is the main difference?

The main difference is that in free market economies, the people decide what gets produced. In command economies, the government or main body decides what gets produced.

In recent years, many retailers have turned to the Internet to sell their goods and services. Describe How might the use of the Internet help achieve the economic goal of efficiency?

The use of the internet might help achieve the goal of efficiency due to the fact that the internet can help deliver mail quickly and more efficiently.

A woman shops in a mostly empty Soviet food store in 1990. Express Problems Clearly How does this photo illustrate the shortcomings of the Soviet Union's centrally planned economy?

This photo shows that the government dictated what the people can have, but most resources were used to empower the military and image of the country.

In the United States, transactions like the one shown here help determine what goods and services are produced, how they are produced, and who consumes them. Describe How is this transaction helping to answer the three basic economic questions?

This transaction helps answer the three economic questions through the satisfaction of the consumer. It tells the producers what goods and services should be produced.

Specialized skill and knowledge enables this man to fix complex refrigeration equipment—and to earn a living. Draw Conclusions How does this worker benefit from having specialized skill and knowledge?

This worker benefits from having specialized knowledge due to the knowledge he has of machines and how to get them working.

Which of the following describes the benefits of specialization in a free market?

specialization leads to efficient use of capital, land, and labor

What did Karl Marx believe about capitalism?

that it led to exploitation of workers

How do self-interest and competition affect free markets?

they work together to regulate supply, demand, and prices

Why do markets exist?

to allow people to exchange goods and services