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Economics – Chapter 2 & 3

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
A
What incentive motivates a manufacturer to sell a product?
a. making profits on sales
b. putting others out of business
c. pleasing the consumer
d. popularity of the product
A
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?
D
What does the process of specialization do for an economy?
a. It eliminates unemployment.
b. It makes it more efficient.
c. It fosters competition.
d. It makes it easier to control.
B
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
C
9. 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.
C
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
B
Which of the following was a free market philosopher?
a. Karl Marx
b. Adam Smith
c. Vladimir Lenin
d. Friedrich Engels
B
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 capitalc. 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
D
The struggle among various producers for the consumer’s business is called __________.
a. socialism
b. competition
c. incentive
d. self-regulation
B
In what kind of an economy does the government make all the decisions?
a. socialist
b. laissez faire
c. centrally planned
d. free enterprise
C
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
D
What is one of the most important advantages of a free market?
a. It can change rapidly.
b. It protects the less fortunate.
c. It is easy to regulate.
d. It encourages growth
D
Who was the leader that introduced communism and central planning to the former Soviet Union?
a. Karl Marx
b. Joseph Stalin
c. Vladimir Lenin
d. Friedrich Engels
C
Which is the following is a private organization that attempts to influence public officials to act or vote in ways that will benefit the groups member?
A. market research group
B. free enterprise group
C. public policy group
D. interest group
D
The government uses its powers to make sure that businesses disclose information to the
public to make __________.
a. buyers more knowledgeable and safer
b. it hard for businesses to make an excess profit
c. it easier for consumers to save money
d. it easy for businesses to have good information
A
What is the motivating force behind the free market?
a. competition
b. the invisible hand
c. self-interest
d. specialization
C
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
B
What is the most effective way for consumers to make their desires known to businesses?
A. through mail and phone surveys
B. by protesting and boycotting products
C. by the purchases they make
D. by hiring lobbyists and joining consumers
C
the method used by society to produce and distribute goods and services
Economic System
one’s own personal gain
self-interest
the income people receive for supplying such things as land, labor, or capital
factor payments
a situation in which households purchase the goods and services that firms produce
product market
to sell a state-run firm to individuals
privatize
a large Soviet farm leased from the state to groups of peasant farmers
collective
the doctrine that government generally should not intervene in the marketplace
laissez faire
level of economic prosperity
standard of living
government programs that protect people experiencing unfavorable economic conditions
safety net
an economic system that permits the conduct of business with minimal government intervention
free enterprise
an expectation that encourages people to behave in a certain way
incentive
an economic system that relies on habit, custom, or ritual to decide questions of consumption and
production of goods and services
traditional economy
a philosophy based on the belief that democratic means should be used to distribute wealth evenly
throughout a society
socialism
requiring strict obedience to someone such as a dictator
authoritarian
a range with no clear divisions
continuum
a period of change in an economy
transition
Which of the following is a condition that most people would NOT expect the safety net
of the government to provide for?
a. Injuries
b. Joblessness
c. Natural disasters
d. Low income
D
Which of the following is characteristic of a traditional economy?
a. Communities tend to be growing fast.
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.
D

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