Question 1

Which of the following is a correct characterization of socialism?

Accepted Answer

A)  Tradition answers the basic economic questions. 
B)  Markets are used exclusively to answer the basic economic questions. 
C)  Central planning is seldom used to answer the basic economic questions. 
D)  Government ownership of many resources and centralized decision-making answers the basic economic questions. 
A)  Tradition answers the basic economic questions. 
B)  Markets are used exclusively to answer the basic economic questions. 
C)  Central planning is seldom used to answer the basic economic questions. 
D)  Government ownership of many resources and centralized decision-making answers the basic economic questions.

Question 2

Which of the following is a characteristic of capitalism?

Accepted Answer

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

Question 3

According to Adam Smith's invisible hand doctrine:

Accepted Answer

A)  self-interest best serves the interests of society. 
B)  laissez faire must be improved by government intervention. 
C)  producers should serve the best interests of society. 
D)  only laissez faire mercantilism best serves the interests of society. 
A)  self-interest best serves the interests of society. 
B)  laissez faire must be improved by government intervention. 
C)  producers should serve the best interests of society. 
D)  only laissez faire mercantilism best serves the interests of society.

Question 4

A principal feature of a command economy is that ____.

Accepted Answer

A)  production decisions are made by profit-maximizing firms. 
B)  there is a central planning board at the top, which transmits economic decisions down to the various producing and consuming units below. 
C)  consumers are allowed to determine that is produced based on their demand for goods and services. 
D)  regulatory agencies constrain the most egregious forms of market power in a market system of allocation. 
A)  production decisions are made by profit-maximizing firms. 
B)  there is a central planning board at the top, which transmits economic decisions down to the various producing and consuming units below. 
C)  consumers are allowed to determine that is produced based on their demand for goods and services. 
D)  regulatory agencies constrain the most egregious forms of market power in a market system of allocation.

Question 5

In a socialistic system,most economic decisions are made by:

Accepted Answer

A)  firms. 
B)  consumers. 
C)  stockholders. 
D)  government planners. 
A)  firms. 
B)  consumers. 
C)  stockholders. 
D)  government planners.

Question 6

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

Accepted Answer

A)  A religion based on amassing capital. 
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 are correct. 
A)  A religion based on amassing capital. 
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 are correct.

Question 7

What famous economist said,"By pursuing his own interest he (an individual)frequently promotes that of the society more effectually than when he really intends to promote it?"

Accepted Answer

A)  Alfred Marshall. 
B)  Adam Smith. 
C)  Karl Marx. 
D)  Robert L. Heilbroner. 
A)  Alfred Marshall. 
B)  Adam Smith. 
C)  Karl Marx. 
D)  Robert L. Heilbroner.

Question 8

Who was one of the first proponents of employing market economies instead of command economies?

Accepted Answer

A)  Robert Heilbroner. 
B)  Karl Marx. 
C)  Jeffrey Sachs. 
D)  Adam Smith. 
A)  Robert Heilbroner. 
B)  Karl Marx. 
C)  Jeffrey Sachs. 
D)  Adam Smith.

Question 9

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 10

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 11

Adam Smith was an advocate of:

Accepted Answer

A)  mercantilism. 
B)  a nation maximizing its stock of gold. 
C)  unrestricted or free trade. 
D)  the visible hand of public interest. 
A)  mercantilism. 
B)  a nation maximizing its stock of gold. 
C)  unrestricted or free trade. 
D)  the visible hand of public interest.

Question 12

What type of economic system is commonly described as being controlled by an "invisible hand"?

Accepted Answer

A)  A traditional economy. 
B)  A command economy. 
C)  A market economy. 
D)  A communist economy. 
A)  A traditional economy. 
B)  A command economy. 
C)  A market economy. 
D)  A communist economy.

Question 13

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 14

In a market economy,buyers and sellers communicate their intentions to one another through:

Accepted Answer

A)  government planners. 
B)  negotiations overseen by government agencies. 
C)  elected officials. 
D)  prices. 
A)  government planners. 
B)  negotiations overseen by government agencies. 
C)  elected officials. 
D)  prices.

Question 15

In Adam Smith's competitive market economy,the question of what goods to produce is determined by:

Accepted Answer

A)  the "invisible hand" of the price system. 
B)  businesses. 
C)  unions. 
D)  the government, through laws and regulations. 
A)  the "invisible hand" of the price system. 
B)  businesses. 
C)  unions. 
D)  the government, through laws and regulations.

Question 16

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 17

In traditional economies,people base economic decisions on the precedents established by previous generations.

Accepted Answer

A) True 
 B)False

Question 18

In Karl Marx's view,people under the ideal state of communism would be motivated by the principle "from each according to his ability,to each according to his enterprise."

Accepted Answer

A) True 
 B)False

Question 19

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 20

A traditional system solves basic economic questions by long-standing customs.

Accepted Answer

A) True 
 B)False

Exam 22: Economies in Transition

Which of the following is a correct characterization of socialism?

Which of the following is a characteristic of capitalism?

According to Adam Smith's invisible hand doctrine:

A principal feature of a command economy is that ____.

In a socialistic system,most economic decisions are made by:

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

What famous economist said,"By pursuing his own interest he (an individual)frequently promotes that of the society more effectually than when he really intends to promote it?"

Who was one of the first proponents of employing market economies instead of command economies?

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

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

Adam Smith was an advocate of:

What type of economic system is commonly described as being controlled by an "invisible hand"?

Which of the following is one common criticism of capitalism?

In a market economy,buyers and sellers communicate their intentions to one another through:

In Adam Smith's competitive market economy,the question of what goods to produce is determined by:

Which of the following is not a characteristic of capitalism?

In traditional economies,people base economic decisions on the precedents established by previous generations.

In Karl Marx's view,people under the ideal state of communism would be motivated by the principle "from each according to his ability,to each according to his enterprise."

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.

A traditional system solves basic economic questions by long-standing customs.

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

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

International Trade and Finance

Growth and the Less-Developed Countries

Filters