Quiz 3

Question 1

Market economies are based upon:

a. private property and individual self interest.
b. government planning and individual good will toward others.
c. government planning and individual self-interest.
d. public property and individual self-interest.

Answer 1

a. private property and individual self interest.

Question 2

Which of the following is a characteristic of capitalism?

a. Government ownership of capital
b. Public ownership of land
c. Price controls
d. Private property

Answer 2

d. Private property

Question 3

Markets coordinate economic activity through:

a. government coercion.
b. commanding individuals what to do.
c. asking individuals what to do.
d. prices.

Answer 3

d. prices.

Question 4

In principle, socialism is:

a. less concerned about fairness than capitalism.
b. just as concerned about fairness as capitalism.
c. more concerned about fairness than capitalism.
d. not concerned about fairness at all

Answer 4

c. more concerned about fairness than capitalism.

Question 5

Which of the following is a characteristic of a socialist economy?

a. Government ownership of capital.
b. Wages are set by markets.
c. Entrepreneurs are encouraged by the profit motive, to satisfy consumer wants in the most efficient manner possible
d. Distribution of income is according to ability.

Answer 5

a. Government ownership of capital.

Question 6

Most economies today are:

a. pure market economies.
b. differentiated primarily by the degree to which they depend on markets.
c. differentiated primarily by who owns the means of production.
d. socialist.

Answer 6

b. differentiated primarily by the degree to which they depend on markets.

Question 7

In a feudalist society, in comparison with mercantilism:

a. merchants play a more important political role than serfs.
b. tradition plays a more important role than the government.
c. government plays a large role in determining the what, how, and for whom decisions.
d. markets make the central economic decisions

Answer 7

b. tradition plays a more important role than the government.

Question 8

In contrast to the capitalism of the early Industrial Revolution, both feudalism and mercantilism:

a. had stronger central government intervention in economic life.
b. expected tradition to answer the central coordination problems.
c. relied less on the invisible hand to coordinate economic decisions.
d. relied less on state intervention to promote economic growth.

Answer 8

c. relied less on the invisible hand to coordinate economic decisions.

Question 9

Businesses are on the:

a. supply side of factor markets and the demand side of goods markets.
b. demand side of factor markets and the supply side of goods markets.
c. supply side of both factor markets and goods markets.
d. demand side of both factor markets and goods markets.

Answer 9

b. demand side of factor markets and the supply side of goods markets.

Question 10

Government is on the:

a. supply side of factor markets and the demand side of goods markets.
b. demand side of factor markets and the supply side of goods markets.
c. supply side of both factor markets and goods markets.
d. demand side of both factor markets and goods markets.

Answer 10

c. supply side of both factor markets and goods markets.

Question 11

All levels of government (federal, state, and local) consume about what percentage of the total output of the United States?

a. 5 percent
b. 20 percent
c. 60 percent
d. 80 percent

Answer 11

b. 20 percent

Question 12

If the government sets limits on the interest rates that banks can charge consumers, it is:

a. serving as an economic actor.
b. serving as an economic referee.
c. serving the public good.
d. reducing social welfare by interfering with the invisible hand.

Answer 12

b. serving as an economic referee.

Question 13

Suppose a single firm gains control of an industry by preventing other firms from entering the industry. As a result, the price charged by the single firm is much higher than the price that would be charged by many different firms producing this product in a competitive market. This situation can best be described as:

a. a market failure.
b. a government failure.
c. an efficient outcome.
d. a competitive outcome.

Answer 13

a. a market failure.

Question 14

Flu vaccinations of school children have the unintended effect of protecting the vulnerable elderly from contracting the virus. This is an example of a:

a. free rider problem.
b. social force.
c. goods distribution.
d. positive externality.

Answer 14

d. positive externality.

Question 15

Which of the following doesn’t occur in the real world?

a. Market failures
b. Government failures
c. An absence of market failures and government failures
d. Scarcity

Answer 15

c. An absence of market failures and government failures

Question 16

Adam Smith advocated laissez-faire because he believed it was in the interest of:

a. capitalists, whom he regarded as the most dynamic and progressive element in society.
b. the proletariat, who would receive higher wages.
c. the government, which would profit from higher taxes.
d. society as a whole.

Answer 16

d. society as a whole.

Question 17

According to the Heritage Index of Economic Freedom,

a. Economic growth is independent of economic freedom.
b. Economic growth is positively correlated with economic freedom.
c. Economic growth is inversely related to economic freedom.
d. None of the above is correct.

Answer 17

b. Economic growth is positively correlated with economic freedom.

Question 18

Which of the following is an economic institution considered in forming the Heritage economic freedom idex?

a. property rights
b. labor law
c. trade policy
d. All of the above

Answer 18

d. All of the above

Question 19

According to Bowles, there is an economic justification, based on some notion of economic efficiency, for government to do each of the following except?

a. promote competition
b. correct for an external cost (i.e., a negative externality)
c. redistribute income
d. provide for public goods

Answer 19

c. redistribute income