Multiple Choice
Identify the choice that
best completes the statement or answers the question.
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1.
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Which of the following is NOT
characteristic of a centrally planned economy?
a. | The central government owns all land
and capital. | b. | The central government makes all economic
decisions. | c. | Each collective or factory sets its own
goals. | d. | Each person is assigned a job. |
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2.
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What is the struggle among
various producers for the consumer’s business called?
a. | socialism | c. | incentive | b. | competition | d. | self-regulation |
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3.
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Why does even a free market
economy need some government intervention?
a. | to provide for things that the
marketplace does not address | b. | to ensure that the government has the freedom to tax as
necessary | c. | to make sure that the government can fulfill its needs for military
personnel | d. | so that the government has some control over factor
resources |
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4.
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Which of the following is NOT a
key economic question?
a. | What goods and services should be
produced? | b. | How should these goods and services be
produced? | c. | Who consumes these goods and services? | d. | How should it be ensured that goods and services are paid
for? |
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5.
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What does the process of
specialization do for an economy?
a. | It eliminates
unemployment. | c. | It fosters
competition. | b. | It makes it more efficient. | d. | It makes it easier to control. |
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6.
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How could the Chinese economy
be characterized?
a. | free
market | b. | centrally planned | c. | mixed, but on the side of centrally planned | d. | mixed, but on the side of free
market |
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7.
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What is one of the most
important advantages of a free market?
a. | It can change
rapidly. | c. | It is easy to
regulate. | b. | It protects the less fortunate. | d. | It encourages growth. |
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8.
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What incentive motivates a
manufacturer to sell a product?
a. | making profits on
sales | c. | pleasing the
consumer | b. | putting others out of business | d. | popularity of the product |
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9.
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Which of the following was a
free market philosopher?
a. | Karl
Marx | c. | Vladimir
Lenin | b. | Adam Smith | d. | Friedrich Engels |
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10.
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Which of the following is
characteristic of a traditional economy?
a. | Communities tend to be
fast-growing. | b. | They are usually based on light industrial
production. | c. | They have a high standard of living. | d. | Children tend to have the same jobs as their parents
did. |
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11.
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What is the product
market?
a. | the market in which payments are
received for selling products to consumers | b. | the market in which income is received for supplying land,
labor, or capital | c. | the market in which firms purchase the factors of production from
households | d. | the market in which households purchase the goods and services that firms
produce |
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12.
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What incentive do manufacturers
have to sell their products?
a. | making profits on
sales | c. | putting others out of
business | b. | pleasing the consumer | d. | popularity of the product |
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13.
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In what kind of an economy does
the government make all the decisions?
a. | socialist | c. | centrally planned | b. | laissez faire | d. | free enterprise |
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14.
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What is the purpose of
competition?
a. | to act as a regulating force in the
marketplace | b. | to cause producers to attempt to put each other out of
business | c. | to cause buyers to have to be careful about spending their
money | d. | to act as a motivating force behind the free
market |
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15.
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What is the function of an
economic system?
a. | to make sure all people have equal
access to goods | b. | to produce and distribute goods and services | c. | to give all producers the same access to
consumers | d. | to make sure people are paid for their
labor |
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16.
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Which of the following is a
condition that most people would NOT expect the safety net of the government to provide
for?
a. | injuries | c. | natural disasters | b. | joblessness | d. | low income |
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17.
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How would the economy of Canada
be likely to be characterized?
a. | free
market | b. | centrally planned | c. | mixed, but on the side of centrally planned | d. | mixed, but on the side of free
market |
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18.
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What is an important advantage
of a free market?
a. | It does not change unless the
government directs it. | b. | It offers a wide variety of goods and
services. | c. | It is easy to regulate. | d. | It protects the less
fortunate. |
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19.
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Who was the leader that
introduced communism and central planning to the former Soviet Union?
a. | Karl
Marx | c. | Vladimir
Lenin | b. | Joseph Stalin | d. | Friedrich Engels |
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20.
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What is the motivating force
behind the free market?
a. | competition | c. | self-interest | b. | the invisible hand | d. | specialization |
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21.
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What might be a hardship for
citizens of a centrally planned economy making a transition to a market-based
system?
a. | Farmers would have to grow the crops
that the government instructed them to. | b. | Only poor quality goods would be available to consumers, because manufacturers
focused on quantity, not quality. | c. | Workers would lose job security and guaranteed
incomes. | d. | Entrepreneurs would have fewer opportunities to start new
businesses. |
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22.
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A person who believed in the
doctrine of laissez faire would disapprove of
a. | the invisible hand of the
marketplace. | b. | consumer sovereignty. | c. | self-interest as the motivating force in the free
market. | d. | government funding of education. |
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23.
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Which of the following does a
government provide as part of a safety net for the people?
a. | general elections every four
years | c. | a strong military
defense | b. | unemployment compensation | d. | regulation of commerce |
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24.
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Suppose there is a family in
which all the boys are expected to become farmers when they are adults, just as their fathers and
grandfathers did. In which kind of economy do they participate?
a. | false
economy | c. | traditional
economy | b. | command economy | d. | centrally planned economy |
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25.
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You are an entrepreneur with an
innovative idea for a new business. In which kind of economy would you have the most opportunity to
try to achieve success?
a. | market
economy | c. | traditional
economy | b. | command economy | d. | economy of scale |
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26.
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Why do markets
exist?
a. | Markets ensure that government does
not intervene in the production of goods and services. | b. | Markets provide self-sufficient people with public places
for the exchange of ideas. | c. | Markets ensure economic equity for all
people. | d. | Markets allow people to buy what they need to consume and sell the specialized
goods and services they produce. |
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27.
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Households pay firms for goods
and services. Firms supply households with goods and services. The purchase and supply of goods and
services takes place in the
a. | product
market. | c. | after
market. | b. | factor market. | d. | traditional market. |
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28.
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Which of the following goals is
difficult to achieve in a pure free market system?
a. | economic
efficiency | c. | economic
freedom | b. | economic equity | d. | economic growth |
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29.
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A government prints and
distributes posters to inspire workers to increase their productivity. In which kind of economy does
this most likely take place?
a. | weak
economy | c. | market
economy | b. | traditional economy | d. | centrally planned economy |
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30.
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A person believes that real
equality can only exist when political equality is coupled with economic equality. This person
believes that democratic means should be used to distribute wealth evenly throughout society. This
person is a
a. | socialist. | c. | capitalist. | b. | communist. | d. | authoritarian. |
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31.
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Collectives in the Soviet Union
were inefficient producers of agricultural products. Why?
a. | The farms were too small to produce
substantial crops. | b. | Most farmers were poor and had to pay for their own equipment, seeds, and
fertilizer out of their own pockets. | c. | Farm workers had guaranteed incomes, so they had few incentives to produce
more or better crops. | d. | Soviet central planners ignored the farms in favor of factories producing
consumer goods. |
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32.
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Which of the following is NOT a
weakness of centrally planned economies?
a. | Most workers lack job
security. | b. | Consumers’ needs are generally not
met. | c. | Workers lack incentives to be innovative. | d. | Individual freedoms are sacrificed for societal
goals. |
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33.
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The economy of China is in
transition. What does this mean?
a. | Investments are determined by state
control instead of by private decision. | b. | The economy is moving from central planning toward a market-based
system. | c. | Individual firms are in the process of being sold to the
state. | d. | The government rarely interferes in the free market and is highly receptive to
foreign investment. |
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34.
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In which of the following lists
of mixed economies does the market system dominate?
a. | France, Canada, South Africa, United
Kingdom | b. | United States, United Kingdom, Singapore, Hong
Kong | c. | Cuba, Greece, China, United States | d. | Russia, Peru, France,
Canada |
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Matching
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Identifying Key
Terms
Match each
term with the correct statement below. a. | standard of living | f. | communism | b. | privatize | g. | laissez faire | c. | economic system | h. | collective | d. | self-interest | i. | product market | e. | safety net | j. | factor payments |
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35.
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the method used by society to
produce and distribute goods and services
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36.
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one’s own personal
gain
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37.
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the income people receive for
supplying such things as land, labor, or capital
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38.
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a situation in which
households purchase the goods and services that firms produce
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39.
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to sell a state-run firm to
individuals
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40.
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a large Soviet farm leased
from the state to groups of peasant farmers
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41.
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the doctrine that government
generally should not intervene in the marketplace
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42.
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level of economic
prosperity
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Identifying Key
Terms
Match each
term with the correct statement below. a. | free enterprise | f. | socialism | b. | continuum | g. | transition | c. | incentive | h. | traditional economy | d. | safety net | i. | authoritarian | e. | collective | j. | standard of living |
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43.
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government programs that
protect people experiencing unfavorable economic conditions
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44.
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an economic system that
permits the conduct of business with minimal government intervention
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45.
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an expectation that encourages
people to behave in a certain way
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46.
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an economic system that relies
on habit, custom, or ritual to decide questions of consumption and production of goods and
services
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47.
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a philosophy based on the
belief that democratic means should be used to distribute wealth evenly throughout a
society
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48.
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requiring strict obedience to
someone such as a dictator
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49.
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a range with no clear
divisions
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50.
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a period of change in an
economy
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