Diaz- Intro To Economics Chapter 2
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Which economic system best describes the United States economic system?
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Laissez faire economy
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Mixed market economy
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Centrally planned (command) economy
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Free market economy
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About This Quiz
This quiz covers the material we have covered in Ch. 2 Upon completion of the quiz you need to begin your Economic analysis paper on the China/Hong Kong relationship.
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- 2.
Which system answers the three economic questions in their society (what to produce, how to produce, and who gets it) with government intervention in the market?
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Traditional economies
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Mixed economies
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Centrally planned (command) economies
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Market (free) economies
Correct Answer
A. Centrally planned (command) economiesExplanation
Centrally planned (command) economies answer the three economic questions with government intervention in the market. In these economies, the government controls the allocation of resources, determines what goods and services are produced, decides how they are produced, and determines who gets access to them. The government plays a central role in planning and directing economic activities, rather than leaving it to market forces.Rate this question:
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- 3.
Refers to the freedom for entrepreneurs to begin privately owned organizations without government regulation.
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Financial Freedom
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Fiscal Freedom
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Business Freedom
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Property Rights
Correct Answer
A. Business FreedomExplanation
Business Freedom refers to the freedom for entrepreneurs to begin privately owned organizations without government regulation. This means that individuals have the ability to start and operate businesses without excessive interference or restrictions from the government. It allows entrepreneurs to make their own decisions regarding their business operations, such as setting prices, hiring employees, and choosing suppliers. Business Freedom is an important aspect of economic freedom and is often associated with increased innovation, competition, and economic growth.Rate this question:
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- 4.
North Korea is an example of a centrally planned market economy.
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True
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False
Correct Answer
A. TrueExplanation
North Korea is an example of a centrally planned market economy because the government controls and plans all economic activities, including production, distribution, and pricing. In this system, resources are allocated by the government, and private ownership and market forces have little to no influence. The government sets production targets and prices, and individuals have limited economic freedom.Rate this question:
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- 5.
There is no true mixed economy in the world.
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True
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False
Correct Answer
A. FalseExplanation
The statement is false because there are several countries in the world that have a mixed economy, which combines elements of both capitalism and socialism. In a mixed economy, the government and the private sector both play a role in the economy. Examples of countries with mixed economies include the United States, Canada, Germany, and Sweden.Rate this question:
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- 6.
The Untied States is the best example of a free market in the world.
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True
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False
Correct Answer
A. FalseExplanation
The given statement is false because the United States is not the best example of a free market in the world. While the United States does have elements of a free market economy, it also has significant government intervention and regulation, such as antitrust laws and social welfare programs. Other countries, such as Hong Kong and Singapore, are often cited as better examples of free market economies due to their minimal government intervention and high economic freedom.Rate this question:
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- 7.
A government regulating the price of goods is an example of a centrally planned economy
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True
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False
Correct Answer
A. TrueExplanation
When a government regulates the price of goods, it means that they have control over the prices and can set them according to their own policies. This is a characteristic of a centrally planned economy, where the government has a significant role in making economic decisions and controlling the market. In a centrally planned economy, the government determines the production, distribution, and consumption of goods and services, including setting prices. Therefore, the statement is true.Rate this question:
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- 8.
What is an advantage of the free market system (market system)
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Equal distribution of resources
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Competition and self-interest leads to innovation of new products.
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There is an extensive safety net for the poor.
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Lower price of goods and services due to government regulation
Correct Answer
A. Competition and self-interest leads to innovation of new products.Explanation
Competition and self-interest in a free market system encourage businesses to constantly innovate and create new products. This is because businesses are motivated to attract customers and gain a competitive edge. As a result, consumers have access to a wide range of innovative and improved products. This leads to economic growth, increased efficiency, and overall better quality of goods and services in the market.Rate this question:
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- 9.
Which of the following is a problem for a free market economy?
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Very little innovation due to lack of competition.
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Not enough competition exists
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Big gap in equality between the poor and the wealthy
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Very few economic freedoms
Correct Answer
A. Big gap in equality between the poor and the wealthyExplanation
A big gap in equality between the poor and the wealthy is a problem for a free market economy because it can lead to social unrest and instability. When there is a significant disparity in wealth distribution, it can result in a lack of access to basic necessities and opportunities for the poor, while the wealthy have disproportionate power and influence. This can undermine the principles of fairness and equal opportunity that are essential for a functioning free market system.Rate this question:
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- 10.
Which of the following is a problem for a command economy?
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Few economic freedoms and choices
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Wealth is distributed unequally
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Customs interfere with economic decisions.
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There is no government safety net for the poor
Correct Answer
A. Few economic freedoms and choicesExplanation
A command economy is a system in which the government has complete control over economic decisions and resource allocation. In such an economy, individuals have limited or no freedom to make their own economic choices, such as what to produce, how much to produce, and what prices to set. This lack of economic freedom and choice can lead to inefficiencies, as the government may not have the necessary information or incentives to make optimal decisions. It can also stifle innovation and entrepreneurship, as individuals are not able to freely pursue their own economic interests.Rate this question:
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- 11.
The invisible hand is associate with what type of economy?
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Free markets (market economies)
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Centrally (command) planned markets
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Traditional markets
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Mixed markets
Correct Answer
A. Free markets (market economies)Explanation
The correct answer is free markets (market economies). The concept of the invisible hand is associated with free markets, where individuals and businesses act in their own self-interest and their collective actions unintentionally benefit society as a whole. In a free market, prices and production are determined by supply and demand, and there is minimal government intervention. The invisible hand metaphorically represents the self-regulating nature of free markets, where competition and market forces guide economic decisions and allocate resources efficiently.Rate this question:
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- 12.
Believed that a free market system reduces waste and regulates the economy in the most efficient manner when firms compete and consumers look out for their self-interest.
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Invisible Hand
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Karl Marx
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Communism
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Socialism
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Capitalism
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Adam Smith
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John Maynard Keynes
Correct Answer
A. Adam SmithExplanation
Adam Smith is the correct answer because he is known for his theory of the "invisible hand." According to Smith, in a free market system, individuals pursuing their own self-interest will unintentionally benefit society as a whole. This is because competition among firms leads to efficiency and innovation, while consumers looking out for their self-interest will drive demand and ensure that resources are allocated effectively. Smith's ideas laid the foundation for capitalism and the belief in the power of the free market to regulate the economy.Rate this question:
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- 13.
The economic idea that states that competition and a person’s self-interest would regulate the economy without the need for government intervention.
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Keynesian Economics
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Classical Economics
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Communism
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Invisible Hand
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Socialism
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Karl Marx
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Adam Smith
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John Maynard Keynes
Correct Answer
A. Invisible HandExplanation
The correct answer is "Invisible Hand". The explanation is that the concept of the invisible hand was introduced by economist Adam Smith in his book "The Wealth of Nations". It refers to the idea 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 invisible hand mechanism allows for the efficient allocation of resources and the regulation of the economy without the need for government intervention.Rate this question:
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- 14.
Which of the following is the best example of a mixed economy?
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North Korea
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Hong Kong
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Cuba
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United States
Correct Answer
A. United StatesExplanation
The United States is the best example of a mixed economy because it combines elements of both a free market economy and a centrally planned economy. In the United States, there is a significant level of private ownership and individual decision-making in the market, but the government also plays a role in regulating and overseeing economic activities. This combination allows for both private enterprise and government intervention, making it a mixed economy.Rate this question:
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- 15.
According to the Heritage Foundation's Freedom Index, Hong Kong is considered the most economic "free market" place in the world.
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True
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False
Correct Answer
A. TrueExplanation
According to the Heritage Foundation's Freedom Index, Hong Kong is considered the most economic "free market" place in the world. This means that Hong Kong has a high degree of economic freedom, with limited government intervention and regulation in the market. The index measures factors such as property rights, government integrity, tax burden, and trade freedom to determine the level of economic freedom in a country. Hong Kong consistently ranks at the top of the index, indicating its strong commitment to free market principles and policies. Therefore, the statement that Hong Kong is the most economic "free market" place in the world is true.Rate this question:
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- 16.
Jamestown Colony The following reading questions are practice for the Iowa Assessments. Read the questions at the bottom first and then read the selection. In 1612, John Rolfe began growing tobacco in Jamestown from seeds he obtained from the Spanish colonies. Rolfe acquired the seeds despite the Spaniards’ threat of death to anyone selling tobacco seeds to anyone selling tobacco seeds to a non-Spaniard. The local Native Americans may have aided Rolfe’s acquisition of the seeds, as he was engaged to marry the chief’s daughter, Pocahontas. By 1614, the first tobacco from Virginia was sold in London, England. Despite the disapproval of King James I, this “stinking weed” came into high demand in England and throughout Europe. This led tobacco to become an incredibly profitable crop for Virginian farmers. For England, tobacco became an ideal product. It was easy to ship and cheap to produce. By 1639, at least 750 tons of Virginia tobacco had been shipped to England. Eventually, England did not allow Virginia tobacco to be shipped or sold anywhere but back to England. With tobacco as the main crop, the Virginia colony had the foundation for its economic success. Which of the following factors of production did Rolfe obtain to help start his tobacco farming?
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Physcial Capital
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Labor
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Land
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Human Capital
Correct Answer
A. LandExplanation
In order to start his tobacco farming, Rolfe obtained land. This is evident from the passage which states that Rolfe began growing tobacco in Jamestown and acquired tobacco seeds to grow the crop. Land is a crucial factor of production for farming as it provides the space and resources needed to cultivate crops.Rate this question:
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- 17.
Jamestown Colony In 1612, John Rolfe began growing tobacco in Jamestown from seeds he obtained from the Spanish colonies. Rolfe acquired the seeds despite the Spaniards’ threat of death to anyone selling tobacco seeds to anyone selling tobacco seeds to a non-Spaniard. The local Native Americans may have aided Rolfe’s acquisition of the seeds, as he was engaged to marry the chief’s daughter, Pocahontas. By 1614, the first tobacco from Virginia was sold in London, England. Despite the disapproval of King James I, this “stinking weed” came into high demand in England and throughout Europe. This led tobacco to become an incredibly profitable crop for Virginian farmers. For England, tobacco became an ideal product. It was easy to ship and cheap to produce. By 1639, at least 750 tons of Virginia tobacco had been shipped to England. Eventually, England did not allow Virginia tobacco to be shipped or sold anywhere but back to England. With tobacco as the main crop, the Virginia colony had the foundation for its economic success. According to the text, how did Rolfe acquire the seeds while risking being put to death?
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He stole it from the Spaniards
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He did not use the Spanish seeds for this tobacco farm
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Native American friends acquired it for hiim.
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He purchased it directly from the Spaniards
Correct Answer
A. Native American friends acquired it for hiim.Explanation
According to the text, Rolfe acquired the tobacco seeds from the Spanish colonies despite the Spaniards' threat of death. The text also mentions that the local Native Americans may have aided Rolfe in acquiring the seeds, as he was engaged to marry the chief's daughter, Pocahontas. Therefore, the correct answer is that Native American friends acquired the seeds for him.Rate this question:
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- 18.
Jamestown Colony In 1612, John Rolfe began growing tobacco in Jamestown from seeds he obtained from the Spanish colonies. Rolfe acquired the seeds despite the Spaniards’ threat of death to anyone selling tobacco seeds to anyone selling tobacco seeds to a non-Spaniard. The local Native Americans may have aided Rolfe’s acquisition of the seeds, as he was engaged to marry the chief’s daughter, Pocahontas. By 1614, the first tobacco from Virginia was sold in London, England. Despite the disapproval of King James I, this “stinking weed” came into high demand in England and throughout Europe. This led tobacco to become an incredibly profitable crop for Virginian farmers. For England, tobacco became an ideal product. It was easy to ship and cheap to produce. By 1639, at least 750 tons of Virginia tobacco had been shipped to England. Eventually, England did not allow Virginia tobacco to be shipped or sold anywhere but back to England. With tobacco as the main crop, the Virginia colony had the foundation for its economic success. What factor of production best describes John Rolfe?
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Specialist
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Thief
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Human Capitalist
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Entrepreneur
Correct Answer
A. EntrepreneurExplanation
John Rolfe best fits the description of an entrepreneur. He took a risk by growing tobacco in Jamestown despite the threat of death from the Spaniards. He obtained tobacco seeds and successfully grew the crop, which eventually became highly profitable. Rolfe's actions demonstrate his ability to identify an opportunity, take initiative, and organize resources to create a successful venture.Rate this question:
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- 19.
With the success of tobacco, the demand for labor in the colony increased. Labor was first supplied by indentured servants, who sold their labor for passage to Virginia, food, clothing, and other necessities- but no money. After filling the terms of the contract, usually three to seven years, the indentured servant would be given land, tools, and perhaps a small amount of money. A 20 percent death rate on the voyage over, and further exposure to hard work and disease, made it difficult to recruit indentured laborers. Eventually, farmers turned to slaves to fill their jobs. Although more expensive up-front, slaves were cheaper form of labor in the long run as their work was bought for life. Tobacco was profitable on any size of farm. Although crops other than tobacco, such as wheat, could be grown in the South, the opportunity cost was high. By specializing in growing tobacco, a farmer could maximize his profits over what could be made from growing other crops. One drawback was that the soil on tobacco farms was worn out every four to seven years. For this reason, tobacco farming favored large scale farmers. With this success, Virginia’s comparative advantage lay in growing tobacco. This paragraph suggests that tobacco is directly linked to the development of slavery in the United States:
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True
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False
Correct Answer
A. TrueExplanation
The paragraph explains that as the demand for labor increased in the colony due to the success of tobacco, farmers turned to slaves to fill their jobs. It states that although slaves were more expensive upfront, they were a cheaper form of labor in the long run as their work was bought for life. This suggests that the development of slavery in the United States was directly linked to the profitability of tobacco farming and the need for labor to cultivate and harvest the crop.Rate this question:
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- 20.
With the success of tobacco, the demand for labor in the colony increased. Labor was first supplied by indentured servants, who sold their labor for passage to Virginia, food, clothing, and other necessities- but no money. After filling the terms of the contract, usually three to seven years, the indentured servant would be given land, tools, and perhaps a small amount of money. A 20 percent death rate on the voyage over, and further exposure to hard work and disease, made it difficult to recruit indentured laborers. Eventually, farmers turned to slaves to fill their jobs. Although more expensive up-front, slaves were cheaper form of labor in the long run as their work was bought for life. Tobacco was profitable on any size of farm. Although crops other than tobacco, such as wheat, could be grown in the South, the opportunity cost was high. By specializing in growing tobacco, a farmer could maximize his profits over what could be made from growing other crops. One drawback was that the soil on tobacco farms was worn out every four to seven years. For this reason, tobacco farming favored large scale farmers. With this success, Virginia’s comparative advantage lay in growing tobacco. Why did tobacco farmers choose to use slaves instead of indentured servants?
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Because it was hard to recruit indentured servants to work on farms
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Because indentured servants worked for free for only 3 to 7 years.
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Because slaves were a cheaper form of labor
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All options
Correct Answer
A. All optionsExplanation
Tobacco farmers chose to use slaves instead of indentured servants because it was difficult to recruit indentured servants to work on farms due to the high death rate during the voyage and the harsh conditions they faced. Additionally, indentured servants only worked for free for a limited period of time (3 to 7 years), while slaves provided a lifetime of labor. Therefore, using slaves was a more cost-effective option for tobacco farmers in the long run.Rate this question:
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- 21.
What are the three economic questions all societies have to answer?
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What to produce, how to produce it, and who gets what is produced
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When to produce, What is is going to cost, and Who gets what is produced
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Where to sell it, How to sell it, and How much it is going to cost
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What resources to use, who produces it, and how much it is going to cost
Correct Answer
A. What to produce, how to produce it, and who gets what is producedExplanation
The three economic questions all societies have to answer are what to produce, how to produce it, and who gets what is produced. These questions revolve around the allocation of resources, the methods of production, and the distribution of goods and services within a society. By addressing these questions, societies can determine their priorities, optimize production processes, and ensure fair distribution of resources and benefits.Rate this question:
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- 22.
Which of the following terms best describes the idea that the government should not become involved in the marketplace?
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Scarcity
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Laissez Faire
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Entrepreneurship
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Socialism
Correct Answer
A. Laissez FaireExplanation
Laissez Faire is the term that best describes the idea that the government should not become involved in the marketplace. Laissez Faire is an economic concept that advocates for minimal government intervention in economic affairs. It promotes free market capitalism, where individuals and businesses are allowed to operate without significant government regulation or interference. This approach believes that the market should be left to its own devices, with supply and demand determining prices and allocation of resources.Rate this question:
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- 23.
Communism and Socialism are both forms of centrally planned economies, the major difference is that in Communist countries the people are able to elect their leaders while in Socialist countries that leaders are not elected.
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True
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False
Correct Answer
A. FalseExplanation
The explanation for the given correct answer is that the statement is incorrect. The major difference between Communism and Socialism is not about the election of leaders. In both systems, the government plays a significant role in the economy, but in Communism, there is no private ownership of property and all resources are shared equally among the people, whereas in Socialism, there can still be private ownership of property, but the government controls certain key industries.Rate this question:
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- 24.
Which of the following goals is not easily met in a Centrally Planned economy
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Economic growth
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Economic equity (equality)
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Economic freedom
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Economic efficiency
Correct Answer
A. Economic freedomExplanation
In a centrally planned economy, the government has control over the allocation of resources and production decisions. This means that individuals and businesses have limited freedom in making economic choices. Economic freedom, which refers to the ability of individuals and businesses to make decisions regarding their own economic activities, is not easily met in a centrally planned economy. The government's control and regulation restricts the freedom of individuals and businesses to engage in economic activities of their choice, leading to a lack of economic freedom in such an economic system.Rate this question:
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- 25.
Traditional economies are the most common form of economic systems in the world.
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True
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False
Correct Answer
A. FalseExplanation
The statement that traditional economies are the most common form of economic systems in the world is false. Traditional economies are actually becoming less common as the world becomes more globalized and interconnected. Most countries now have mixed economies that combine elements of traditional, command, and market economies. Traditional economies are primarily found in remote and isolated regions where people rely on subsistence farming and hunting-gathering for their livelihoods.Rate this question:
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- 26.
Karl Marx believed that the Invisible hand is able to regulate the economy without government involvement.
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True
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False
Correct Answer
A. FalseExplanation
Karl Marx did not believe that the Invisible hand is able to regulate the economy without government involvement. He was critical of the capitalist system and argued that government intervention was necessary to protect the interests of the working class and ensure a more equitable distribution of wealth. Marx believed that the capitalist system inherently led to exploitation and inequality, and that government intervention and control were necessary to address these issues.Rate this question:
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- 27.
Which of the following goals is the biggest disadvantage in a centrally planned economy?
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Econmic equity
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Economic security
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Economic Freedom
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Economic efficiency
Correct Answer
A. Economic FreedomExplanation
In a centrally planned economy, the government has control over all economic decisions and resources. This means that individuals and businesses have limited freedom to make their own choices regarding production, consumption, and investment. Economic freedom allows for competition, innovation, and entrepreneurship, which are essential for economic growth and development. Therefore, the lack of economic freedom is a significant disadvantage in a centrally planned economy as it restricts individual liberty and hinders economic progress.Rate this question:
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- 28.
This freedom refers to banks being able to operate with minimal government involvement
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Monetary Freedom
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Fiscal Freedom
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Financial Freedom
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Freedom from corruption
Correct Answer
A. Financial FreedomExplanation
Financial freedom refers to the ability of banks to operate with minimal government involvement. This means that banks have the freedom to make their own financial decisions and strategies without excessive interference or regulation from the government. It allows banks to have more control over their operations, lending practices, and investments. Financial freedom is essential for the efficient functioning of banks and the overall health of the financial system. It promotes competition, innovation, and economic growth.Rate this question:
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- 29.
Refers to the freedom for entrepreneurs to begin privately owned organizations without government regulation.
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Financial freedom
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Fiscal Freedom
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Business Freedom
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Property rights
Correct Answer
A. Property rightsExplanation
Property rights refer to the freedom for entrepreneurs to begin privately owned organizations without government regulation. This means that individuals have the right to own, use, and dispose of property as they see fit, without interference from the government. This includes the right to start and operate businesses without excessive government regulations or restrictions. By having secure property rights, entrepreneurs have the freedom to innovate, invest, and create wealth, which is essential for economic growth and development.Rate this question:
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- 30.
Question: According to the following news article, Brazil's road project is a move towards what type of economic system? Brazil Opens Roads To Privatization BR 116, aka the Highway of Death. A looooong two lane road crowded with cars and cargo stretching from Rio down to through the richest cities in the south. The government plans to auction off public roadways to the lowest bidder in an effort to improve the country's highway's as Brazil's economy continues to expand. Privatization is back. It almost feels like the 1990s. Well, sort of. It’s not out right privatization, but the Brazilian government plans to announce billions in government roads to private investors through long term deals that would give the private companies the right to operate roads, rails and ports, many once built by the government, for around 30 years. Brazilian president Dilma Rousseff is set to announce the projects next Wednesday in Brasilia, the nation’s capital. The total amount is estimated to be around R$90 billion, or $45 billion over the next five years
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Free Market
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Centrally Planned Market
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Traditional Market
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None of the above
Correct Answer
A. Free MarketExplanation
The correct answer is Free Market because the article states that the Brazilian government plans to auction off public roadways to private investors. This indicates a shift towards a system where private companies have the right to operate roads, rails, and ports, which is characteristic of a free market economy.Rate this question:
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- 31.
Question: According to the following news article, privatatization is an attempt to do what? Brazil Opens Roads To Privatization BR 116, aka the Highway of Death. A looooong two lane road crowded with cars and cargo stretching from Rio down to through the richest cities in the south. The government plans to auction off public roadways to the lowest bidder in an effort to improve the country's highway's as Brazil's economy continues to expand. Privatization is back. It almost feels like the 1990s. Well, sort of. It’s not out right privatization, but the Brazilian government plans to announce billions in government roads to private investors through long term deals that would give the private companies the right to operate roads, rails and ports, many once built by the government, for around 30 years. Brazilian president Dilma Rousseff is set to announce the projects next Wednesday in Brasilia, the nation’s capital. The total amount is estimated to be around R$90 billion, or $45 billion over the next five years
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Reduce the role of private companies in the highway business
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Improve the conditions and safety of the highway's in Brazil
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Increase the role of the government in the highway business.
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Reduce the amount of taxes Brazilian's pay.
Correct Answer
A. Improve the conditions and safety of the highway's in BrazilExplanation
The correct answer is "Improve the conditions and safety of the highways in Brazil." According to the news article, the Brazilian government plans to auction off public roadways to private investors in order to improve the country's highways as Brazil's economy continues to expand. This suggests that privatization is being used as an attempt to improve the conditions and safety of the highways in Brazil.Rate this question:
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- 32.
According to the article what gives the entrepreneur a sense of satisfaction? "In a Shift, Cubans taste Working for Themselves." This cafe in Bauta, near Havana, is part of a tiny, but now expanding, private sector in Cuba. By VICTORIA BURNETT Published: February 3, 2011- New York Times
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Making money
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Helping the country
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Helping others
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Keeping the Cuban revolution alive
Correct Answer
A. Making moneyExplanation
The article mentions that Marisela Álvarez, who opened a small cafe in her home, feels satisfied when she looks at how much money she has made at the end of the day. This suggests that making money gives the entrepreneur a sense of satisfaction.Rate this question:
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- 33.
According by how much did the amount of self-employed Cubans grow after the privatization efforts? "In a Shift, Cubans taste Working for Themselves." This cafe in Bauta, near Havana, is part of a tiny, but now expanding, private sector in Cuba. By VICTORIA BURNETT Published: February 3, 2011- New York Times
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50%
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5%
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4.3 million
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750,000
Correct Answer
A. 50%Explanation
The correct answer is 50%. According to the article, by the end of 2010, the government had awarded 75,000 new licenses, which resulted in a 50% increase in the official ranks of the self-employed. This indicates that the amount of self-employed Cubans grew by 50% after the privatization efforts.Rate this question:
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