Ch. 2 Economics (Markets)
This quiz covers 3 economic systems and the economists most associated with them. It covers the freedom index that rates the freedom of economies around the world and the characteristics of American Free enterprise.
Questions and Answers
- 1.
Adam Smith’s idea that competition and a person’s self-interest would regulate the economy without the need for government intervention.
- A.
Free Market
- B.
Socialism
- C.
Communism
- D.
Inbisible Hand
- E.
Capitalism
Correct Answer
D. Inbisible HandExplanation
The correct answer is "Invisible Hand." Adam Smith's idea of the "Invisible Hand" refers to the concept that individuals, by pursuing their own self-interest in a competitive market, unintentionally promote the well-being of society as a whole. According to Smith, the market forces of supply and demand, guided by self-interest, would naturally regulate the economy without the need for government intervention. This concept is a key principle of capitalism and emphasizes the importance of free markets and competition.Rate this question:
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- 2.
A term describing a political and economic system where the government has control of all the factors of production and attempts to distribute resources without a democratically elected government.
- A.
Socialism
- B.
American Free Enterprise
- C.
Communism
- D.
Centrally Planned Economy
Correct Answer
C. CommunismExplanation
Communism is a term that describes a political and economic system where the government has control over all the factors of production and aims to distribute resources without the involvement of a democratically elected government. In a communist system, there is no private ownership of property and all resources are shared equally among the people. This system advocates for a classless society where everyone is treated equally and there is no wealth disparity.Rate this question:
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- 3.
An economic system that believes democracy should be used to distribute wealth evenly throughout society and in in which the government controls some of the factors of production but there are some forms of private enterprise and democracy.
- A.
American free enterprise
- B.
Mixed market
- C.
Communism
- D.
Socialism
Correct Answer
D. SocialismExplanation
Socialism is an economic system that believes in using democracy to distribute wealth evenly throughout society. In this system, the government controls some of the factors of production, but there is also room for private enterprise and democracy. This means that while the government may have control over certain industries or resources, there is still space for private businesses to operate. Socialism aims to create a more equitable society by ensuring that wealth is not concentrated in the hands of a few, but is distributed more evenly among the population.Rate this question:
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- 4.
In his book. the Communist Manifesto, he argued that a centrally planned economy would best regulate the economy to distribute resources equally.
- A.
Adam Smith
- B.
Karl Marx
Correct Answer
B. Karl MarxExplanation
Karl Marx is the correct answer because in his book, the Communist Manifesto, he argued for a centrally planned economy that would distribute resources equally. This idea of a centrally planned economy is a key aspect of Marxist theory, which advocates for the abolition of private property and the establishment of a classless society. Marx believed that this would lead to a more equitable distribution of resources and eliminate the exploitation of the working class by the bourgeoisie.Rate this question:
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- 5.
In his book, Wealth of Nations, he argued that a free market system reduces waste and regulates the economy in the most efficient manner. He explained his ideas using the "invisible hand" theory.
- A.
Adam Smith
- B.
Karl Marx
Correct Answer
A. Adam SmithExplanation
Adam Smith is the correct answer because he argued in his book, Wealth of Nations, that a free market system reduces waste and regulates the economy in the most efficient manner. He also explained his ideas using the "invisible hand" theory, which suggests that individuals pursuing their own self-interests in a free market can unintentionally benefit society as a whole.Rate this question:
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- 6.
The invisible hand is associated helps explain what type of economic system?
- A.
Free markets (market economies)
- B.
Centrally (command) planned markets
- C.
Traditional markets
- D.
Mixed markets
Correct Answer
A. Free markets (market economies)Explanation
The invisible hand is a concept introduced by economist Adam Smith, which suggests that individuals pursuing their own self-interests in a free market will unintentionally promote the well-being of society as a whole. This concept is closely associated with free markets or market economies, where prices are determined by supply and demand and resources are allocated based on individual choices rather than government intervention. Therefore, the correct answer is free markets (market economies).Rate this question:
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- 7.
Which of the following is a problem for a centrally planned economy?
- A.
Few economic freedoms and choices
- B.
Wealth is distributed unequally
- C.
Family traditions interfere with economic decisions.
- D.
There is no government safety net for the poor
Correct Answer
A. Few economic freedoms and choicesExplanation
A centrally planned economy is characterized by a centralized authority that controls and makes decisions regarding the allocation of resources and production. This lack of economic freedom and choices is a problem because it restricts individuals and businesses from making their own decisions and pursuing their own interests. It can lead to inefficiencies, lack of innovation, and limited economic growth.Rate this question:
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- 8.
Which of the following is a problem for a free market economy?
- A.
Very few economic choices
- B.
Not enough competition exists
- C.
Big gap between the poor and the wealthy
- D.
No economic freedom
Correct Answer
C. Big gap between the poor and the wealthyExplanation
A big gap between the poor and the wealthy is a problem for a free market economy because it signifies income inequality and a lack of equal opportunities for all individuals. In a truly free market economy, there should be fair competition and equal access to resources and opportunities, allowing individuals to succeed based on their abilities and efforts. However, when there is a significant wealth disparity, it indicates that certain individuals or groups have an unfair advantage or monopolistic control over resources, limiting the economic freedom and opportunities for others. This can lead to social unrest and instability, undermining the principles of a free market economy.Rate this question:
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- 9.
What is an advantage of the free market system (market system)
- A.
Equal distribution of resources.
- B.
Competition leads to innovation of new products.
- C.
There is an extensive safety net for the poor that ensures equality.
- D.
The government makes most decisions for its citizens.
Correct Answer
B. Competition leads to innovation of new products.Explanation
Competition in the free market system encourages businesses to constantly improve and innovate in order to gain a competitive edge. This drive for innovation leads to the development of new products and services that meet the changing needs and preferences of consumers. This not only benefits businesses by allowing them to attract more customers and increase their profits, but it also benefits consumers by providing them with a wider range of choices and better quality products. Overall, competition in the free market system promotes economic growth and encourages continuous improvement and innovation.Rate this question:
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- 10.
A government controlling the price of goods is an example of a free market economy
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because a government controlling the price of goods is actually an example of a command economy, not a free market economy. In a free market economy, prices are determined by the forces of supply and demand, with minimal government intervention. In a command economy, the government has control over the prices of goods and services, as well as other economic decisions.Rate this question:
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- 11.
The Untied States is an example of a mixed market economy.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
A mixed market economy refers to an economic system that combines elements of both a market economy and a planned economy. In a mixed market economy, the government and the market both play a role in determining the allocation of resources and the production of goods and services. The United States is an example of a mixed market economy because while it is primarily driven by market forces, the government also intervenes in various aspects such as regulation, public goods provision, and social welfare programs.Rate this question:
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- 12.
There is no true mixed economy in the world.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
This statement is false because there are countries in the world that have a mixed economy, which is a combination of both market and planned economies. In a mixed economy, the government and private sector both play a role in the allocation of resources and decision-making. Examples of countries with mixed economies include the United States, Canada, and many European countries.Rate this question:
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- 13.
Cuba is an example of a Centrally planned (command market) economy.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Cuba is indeed an example of a centrally planned (command market) economy. In this type of economic system, the government has control over the allocation of resources, production decisions, and distribution of goods and services. In Cuba, the government owns and operates most industries, sets production quotas, and determines prices. This centralized approach is aimed at achieving specific economic and social goals, such as income equality and social welfare, but it can also limit individual freedoms and entrepreneurship.Rate this question:
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- 14.
Selling government businesses and services to the private sector is called _________ ector.
- A.
Privatization
- B.
Nationalization
- C.
Business Freedom
- D.
Property Rights
Correct Answer
A. PrivatizationExplanation
Privatization refers to the process of selling government-owned businesses and services to the private sector. This allows private companies to take over the ownership and management of these entities, leading to increased competition, efficiency, and innovation in the market. Privatization is often pursued by governments as a means to reduce their financial burden, improve service quality, and stimulate economic growth.Rate this question:
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- 15.
This graphic shows what type of economic market system?
- A.
Centrally Planned Economy
- B.
Free market Economy
- C.
Traditional Economy
- D.
Mixed Market Economy
Correct Answer
B. Free market EconomyExplanation
The graphic represents a free market economy. In a free market economy, the allocation of resources and the production and consumption of goods and services are primarily determined by individuals and businesses, rather than the government. This type of economic system allows for competition, private ownership, and the freedom to buy and sell goods and services based on supply and demand.Rate this question:
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- 16.
This shared good or service is often a response to a market failure. It is not paid by individual consumers, nor are free riders easily excluded.
- A.
Public Good
- B.
Laissez Faire
- C.
Invisible Hand
- D.
Positive Externality
Correct Answer
A. Public GoodExplanation
A public good is a shared good or service that is provided by the government or a public entity. It is often a response to a market failure, where the private sector fails to provide the good or service efficiently. Public goods are not paid for by individual consumers, as they are funded through taxes or government funding. Additionally, free riders cannot easily be excluded from benefiting from public goods, meaning that once the good or service is provided, it is available to everyone regardless of whether they contributed to its provision.Rate this question:
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- 17.
Which of the following is NOT one of the three economic questions every society has to answer?
- A.
What to produce
- B.
How much to charge
- C.
How to produce
- D.
Who gets it
Correct Answer
B. How much to chargeExplanation
The question "How much to charge" is not one of the three economic questions every society has to answer. The three economic questions are: "What to produce," which refers to the goods and services that should be produced; "How to produce," which relates to the methods and techniques used in production; and "Who gets it," which concerns the distribution of goods and services among individuals in society. The question of how much to charge is more related to pricing decisions and market dynamics, rather than fundamental economic questions.Rate this question:
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- 18.
Which economic system best describes the United States economic system?
- A.
Traditional economies
- B.
Mixed economies
- C.
Centrally planned (command) economies
- D.
Market (free) economies
Correct Answer
B. Mixed economiesExplanation
The United States economic system is best described as a mixed economy. This means that it combines elements of both a market economy and a centrally planned economy. In a mixed economy, the government plays a role in regulating and controlling certain aspects of the economy, while also allowing for private ownership and market competition. The United States has a mixture of government intervention, such as regulations and social programs, along with a free market that allows for private businesses and individual decision-making.Rate this question:
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- 19.
Which of the following is the best example of a mixed economy?
- A.
North Korea
- B.
Hong Kong
- C.
Cuba
- D.
United States
Correct Answer
D. United StatesExplanation
The United States is the best example of a mixed economy because it combines elements of both capitalism and socialism. It has a market-based economy where private individuals and businesses have the freedom to own and control the means of production. However, the government also plays a significant role in regulating and overseeing various sectors of the economy, providing social welfare programs, and promoting public goods and services. This combination of private and public ownership and control makes the United States a mixed economy.Rate this question:
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- 20.
Refers to the idea that the government should not be involved in the economic decisions, in other words it should "let it be".
- A.
Laissez Faire
- B.
Communism
- C.
Deficit spending
- D.
The safety net
Correct Answer
A. Laissez FaireExplanation
Laissez Faire refers to the idea that the government should not be involved in economic decisions and should allow the economy to operate freely without interference. This means that the government should not regulate or control businesses, prices, or trade. Instead, it believes that the market forces of supply and demand will naturally determine the best outcomes for the economy. Laissez Faire is often associated with free-market capitalism and the belief in limited government intervention in the economy.Rate this question:
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- 21.
Temporary Assistance For Needy Families (TANF) is an example of the government's safety net for the poor
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Temporary Assistance For Needy Families (TANF) is indeed an example of the government's safety net for the poor. TANF is a federal assistance program that provides financial assistance to low-income families with dependent children. It aims to help families achieve self-sufficiency by providing them with temporary cash assistance, job training, and other support services. TANF is designed to assist families in meeting their basic needs and reducing their reliance on government assistance. Therefore, the statement "True" accurately describes TANF's role as a safety net for the poor.Rate this question:
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- 22.
Which of the following is NOT an example of a public good?
- A.
Google
- B.
U.S. Army
- C.
Highway 141
- D.
Pattee park
Correct Answer
A. GoogleExplanation
Google is not an example of a public good because it is a private company that provides services for profit. Public goods are typically non-excludable and non-rivalrous, meaning they are available to everyone and one person's use does not diminish its availability to others. In contrast, Google's services are not freely available to everyone and its usage can be limited or restricted based on various factors such as subscription fees, terms of service, and geographic restrictions.Rate this question:
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- 23.
Drilling for oil in the rain forest creates _____________externalities for humans.
- A.
Positive
- B.
Negative
- C.
Both positive and negative
- D.
Neither positive nor negative
Correct Answer
C. Both positive and negativeExplanation
Drilling for oil in the rainforest creates both positive and negative externalities for humans. On one hand, it can bring economic benefits such as job opportunities and revenue for the local communities. On the other hand, it can have detrimental effects on the environment, leading to deforestation, habitat destruction, and pollution, which can harm the health and well-being of the local population. Thus, the drilling activity in the rainforest has both positive and negative impacts on humans.Rate this question:
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- 24.
The graphic above shows an example of what economic concept?
- A.
Public good
- B.
Positive externality
- C.
Negative externality
- D.
Government safety net
Correct Answer
C. Negative externalityExplanation
The graphic above illustrates a negative externality, which occurs when the production or consumption of a good or service imposes costs on third parties who are not involved in the transaction. In this case, the graphic suggests that the economic concept being depicted is a situation where pollution or environmental damage is being caused by a particular activity. This activity is resulting in costs or negative effects on individuals or communities who are not directly involved in the production or consumption of the good or service.Rate this question:
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- 25.
The U.S. government announces 15 year olds can now work the midnight shift on school nights is a movement towards what type of economic system?
- A.
Free Market
- B.
Centrally Planned
- C.
Traditional economy
Correct Answer
A. Free MarketExplanation
The U.S. government announcing that 15 year olds can work the midnight shift on school nights indicates a movement towards a Free Market economic system. In a Free Market system, the government allows individuals and businesses to freely engage in economic activities without much intervention or regulation. This decision suggests that the government is giving more freedom and flexibility to both employers and young workers, allowing them to negotiate their own employment terms and participate in the labor market.Rate this question:
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- 26.
The U.S. government announces that only U.S. citizens can open up new businesses is a movement towards what type of economic system
- A.
Centrally Planned
- B.
Free Market
Correct Answer
A. Centrally PlannedExplanation
The given correct answer is "Centrally Planned." This is because in a centrally planned economic system, the government has control over the allocation of resources and decision-making in the economy. By announcing that only U.S. citizens can open up new businesses, the U.S. government is exercising its control and authority over economic activities, which aligns with the principles of a centrally planned system.Rate this question:
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- 27.
All public goods create positive externalities with no negative externalities.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Public goods are goods that are non-excludable and non-rivalrous, meaning that they are available for everyone to use and one person's use does not diminish the availability for others. While public goods do create positive externalities, such as increased social welfare and economic efficiency, they can also create negative externalities. For example, a public park may create positive externalities by providing recreational opportunities, but it may also create negative externalities such as increased traffic congestion or noise pollution in the surrounding area. Therefore, the statement that all public goods create positive externalities with no negative externalities is false.Rate this question:
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- 28.
In a mixed market economy the government does not provide a safety net that helps improve the standard of living for its citizens.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
In a mixed market economy, the government does provide a safety net that helps improve the standard of living for its citizens. This safety net includes social welfare programs such as healthcare, education, unemployment benefits, and retirement pensions. These programs aim to support individuals and families in times of need and ensure a certain level of well-being for all citizens. Therefore, the statement that the government does not provide a safety net in a mixed market economy is incorrect.Rate this question:
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- 29.
The following describes which type of economic system: You have 2 cows. Sell 1 cow and buy a bull.
- A.
Free Market Capitalism
- B.
Centrally Planned Economic System
- C.
Traditional Economic System
- D.
None of the options
Correct Answer
A. Free Market CapitalismExplanation
In a free market capitalism system, individuals have the freedom to make their own economic decisions without government interference. In this scenario, the individual decides to sell one cow and buy a bull, which is a strategic decision made to potentially increase their future profits. This action reflects the principles of private ownership, voluntary exchange, and profit motive that are characteristic of a free market capitalist system.Rate this question:
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- 30.
The concept of the Invisible Hand does not exist in a mixed market economy.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The concept of the Invisible Hand does exist in a mixed market economy. The Invisible Hand refers to the idea that individuals pursuing their own self-interest in a free market will unintentionally benefit society as a whole. In a mixed market economy, which combines elements of both free market and government intervention, the Invisible Hand still plays a role as individuals and businesses make decisions based on their self-interest, but the government also has some control and regulation over the economy. Therefore, the statement that the concept of the Invisible Hand does not exist in a mixed market economy is false.Rate this question:
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