Question 1

A command system uses a group of planners or central authority to make basic economic decisions.

Accepted Answer

A) True 
 B)False

Question 2

Economic efficiency and economic freedom are commonly cited as two major benefits of socialism.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following societies is the most likely to have a traditional economy?

Accepted Answer

A) The United States. 
B) The Inuit (native people of Northern Canada). 
C) Cuba under Castro's rule. 
D) Modern-day Hong Kong. 
A) The United States. 
B) The Inuit (native people of Northern Canada). 
C) Cuba under Castro's rule. 
D) Modern-day Hong Kong.

Question 4

Which of the following is not a characteristic of capitalism?

Accepted Answer

A) Private ownership of the factors of production. 
B) Businesses make their own product and price decisions. 
C) Public ownership of the factors of production. 
D) Decentralized decision-making using markets. 
A) Private ownership of the factors of production. 
B) Businesses make their own product and price decisions. 
C) Public ownership of the factors of production. 
D) Decentralized decision-making using markets.

Question 5

The term "socialism" refers to which of the following?

Accepted Answer

A) A religion centered on community interaction. 
B) An economic system characterized by private ownership of resources, and decentralized market allocation. 
C) An economic system characterized by government ownership of resources and centralized allocation. 
D) None of the above answers are correct. 
A) A religion centered on community interaction. 
B) An economic system characterized by private ownership of resources, and decentralized market allocation. 
C) An economic system characterized by government ownership of resources and centralized allocation. 
D) None of the above answers are correct.

Question 6

Karl Marx envisioned communism as an economic system that blends the best elements of capitalism and socialism.

Accepted Answer

A) True 
 B)False

Question 7

Under socialism, no markets can operate at all.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following represents key strengths of the market economy as a system of allocation?

Accepted Answer

A) Goods and services are allocated based on willingness and ability to pay, rather than based on need. 
B) Producers have strong incentives to innovate because successful innovators are rewarded with higher profit. 
C) Since price is freely set based on supply and demand, shortages and surpluses are minimized. 
D) Both b. and c. above are correct. 
A) Goods and services are allocated based on willingness and ability to pay, rather than based on need. 
B) Producers have strong incentives to innovate because successful innovators are rewarded with higher profit. 
C) Since price is freely set based on supply and demand, shortages and surpluses are minimized. 
D) Both b. and c. above are correct.

Question 9

Adam Smith, in his book, The Wealth of Nations , advocated:

Accepted Answer

A) socialism. 
B) an economy guided by an "invisible hand." 
C) government control of the "invisible hand." 
D) the adoption of mercantilism. 
A) socialism. 
B) an economy guided by an "invisible hand." 
C) government control of the "invisible hand." 
D) the adoption of mercantilism.

Question 10

Which of the following statements is true ?

Accepted Answer

A) The doctrine of laissez-faire advocates an economic system with extensive government intervention and little individual decision-making. 
B) In capitalism income is distributed on the basis of need. 
C) Adam Smith was the father of socialism. 
D) Most real-world economies are mixed economic systems. 
E) The "invisible hand" refers to government economic control. 
A) The doctrine of laissez-faire advocates an economic system with extensive government intervention and little individual decision-making. 
B) In capitalism income is distributed on the basis of need. 
C) Adam Smith was the father of socialism. 
D) Most real-world economies are mixed economic systems. 
E) The "invisible hand" refers to government economic control.

Question 11

An economic system is the organizations and methods used to determine:

Accepted Answer

A) what goods and services are produced. 
B) how goods and services are produced. 
C) for whom goods and services are produced. 
D) all of these. 
A) what goods and services are produced. 
B) how goods and services are produced. 
C) for whom goods and services are produced. 
D) all of these.

Question 12

In Marx's ideal communist society, the state:

Accepted Answer

A) actively promotes income incentives. 
B) follows the doctrine of laissez faire. 
C) owns resources and conducts planning. 
D) does not exist. 
A) actively promotes income incentives. 
B) follows the doctrine of laissez faire. 
C) owns resources and conducts planning. 
D) does not exist.

Question 13

Describe the differences between capitalism and socialism.

Accepted Answer

Capitalism is characterized by private o

Question 14

Which of the following is one common criticism of capitalism?

Accepted Answer

A) Poor product quality and little product diversity. 
B) Inefficiency of nationalized industries. 
C) Inability to adjust quickly to changing economic conditions. 
D) Inadequate environmental protection. 
A) Poor product quality and little product diversity. 
B) Inefficiency of nationalized industries. 
C) Inability to adjust quickly to changing economic conditions. 
D) Inadequate environmental protection.

Question 15

Which of the following statements best describes the role played by prices in a command economy such as the former Soviet Union?

Accepted Answer

A) Prices were used to allocate resources. 
B) Prices played the same role as in a market economy. 
C) Prices were used to ration final goods and services but not to allocate resources. 
D) None of these statements is descriptive. 
A) Prices were used to allocate resources. 
B) Prices played the same role as in a market economy. 
C) Prices were used to ration final goods and services but not to allocate resources. 
D) None of these statements is descriptive.

Question 16

Which of the following is not an idea advocated by Adam Smith?

Accepted Answer

A) Businesspersons conspiring to fix prices are a threat to the price system. 
B) Pursuit of private self interest with an invisible hand is the best way to promote the public interest. 
C) Government should control the economy. 
D) The government should provide for national defense and little else. 
A) Businesspersons conspiring to fix prices are a threat to the price system. 
B) Pursuit of private self interest with an invisible hand is the best way to promote the public interest. 
C) Government should control the economy. 
D) The government should provide for national defense and little else.

Question 17

In the real world, countries use a mixture of the three basic types of economic systems.

Accepted Answer

A) True 
 B)False

Question 18

The basic characteristics of a pure capitalist system include the private ownership of the means of production and economic activity being coordinated through a system of markets and prices.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a characteristic of capitalism?

Accepted Answer

A) Government ownership of all capital. 
B) Government decision-making is preferred to decentralized decision-making. 
C) Market determination of prices and quantity. 
D) Equality of income. 
A) Government ownership of all capital. 
B) Government decision-making is preferred to decentralized decision-making. 
C) Market determination of prices and quantity. 
D) Equality of income.

Question 20

In a command economy, resources are publicly owned by government and economic activity is coordinated through a central government planning authority.

Accepted Answer

A) True 
 B)False

Exam 19: Economies in Transition

A command system uses a group of planners or central authority to make basic economic decisions.

Economic efficiency and economic freedom are commonly cited as two major benefits of socialism.

Which of the following societies is the most likely to have a traditional economy?

Which of the following is not a characteristic of capitalism?

The term "socialism" refers to which of the following?

Karl Marx envisioned communism as an economic system that blends the best elements of capitalism and socialism.

Under socialism, no markets can operate at all.

Which of the following represents key strengths of the market economy as a system of allocation?

Adam Smith, in his book, The Wealth of Nations , advocated:

Which of the following statements is true ?

An economic system is the organizations and methods used to determine:

In Marx's ideal communist society, the state:

Describe the differences between capitalism and socialism.

Which of the following is one common criticism of capitalism?

Which of the following statements best describes the role played by prices in a command economy such as the former Soviet Union?

Which of the following is not an idea advocated by Adam Smith?

In the real world, countries use a mixture of the three basic types of economic systems.

The basic characteristics of a pure capitalist system include the private ownership of the means of production and economic activity being coordinated through a system of markets and prices.

Which of the following is a characteristic of capitalism?

In a command economy, resources are publicly owned by government and economic activity is coordinated through a central government planning authority.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters