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ECON CH-2 ECONOMIC SYSTEMS

Matching
 
 
Identifying Key Terms
Match each term with the correct statement below.
a.
free enterprise
f.
socialism
b.
continuum
g.
transition
c.
incentive
h.
traditional economy
d.
safety net
i.
authoritarian
e.
collective
j.
standard of living
 

 1. 

a range with no clear divisions
 

 2. 

an economic system that permits the conduct of business with minimal government intervention
 

 3. 

an expectation that encourages people to behave in a certain way
 

 4. 

a philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society
 

 5. 

an economic system that relies on habit, custom, or ritual to decide questions of consumption and production of goods and services
 

 6. 

government programs that protect people experiencing unfavorable economic conditions
 

 7. 

a period of change in an economy
 

 8. 

requiring strict obedience to someone such as a dictator
 
 
Identifying Key Terms
Match each term with the correct statement below.
a.
standard of living
f.
communism
b.
privatize
g.
laissez faire
c.
economic system
h.
collective
d.
self-interest
i.
product market
e.
safety net
j.
factor payments
 

 9. 

the income people receive for supplying such things as land, labor, or capital
 

 10. 

the doctrine that government generally should not intervene in the marketplace
 

 11. 

the method used by society to produce and distribute goods and services
 

 12. 

level of economic prosperity
 

 13. 

to sell a state-run firm to individuals
 

 14. 

a situation in which households purchase the goods and services that firms produce
 

 15. 

a large Soviet farm leased from the state to groups of peasant farmers
 

 16. 

one’s own personal gain
 

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 17. 

Why do markets exist?
a.
Markets allow people to buy what they need to consume and sell the specialized goods and services they produce.
b.
Markets ensure that government does not intervene in the production of goods and services.
c.
Markets provide self-sufficient people with public places for the exchange of ideas.
d.
Markets ensure economic equity for all people.
 

 18. 

You are an entrepreneur with an innovative idea for a new business. In which kind of economy would you have the most opportunity to try to achieve success?
a.
traditional economy
c.
command economy
b.
economy of scale
d.
market economy
 

 19. 

A person believes that real equality can only exist when political equality is coupled with economic equality. This person believes that democratic means should be used to distribute wealth evenly throughout society. This person is a
a.
capitalist.
c.
socialist.
b.
authoritarian.
d.
communist.
 

 20. 

A person who believed in the doctrine of laissez faire would disapprove of
a.
self-interest as the motivating force in the free market.
b.
the invisible hand of the marketplace.
c.
government funding of education.
d.
consumer sovereignty.
 

 21. 

Which of the following was a free market philosopher?
a.
Adam Smith
c.
Karl Marx
b.
Vladimir Lenin
d.
Friedrich Engels
 

 22. 

What is the struggle among various producers for the consumer’s business called?
a.
incentive
c.
socialism
b.
competition
d.
self-regulation
 

 23. 

Households pay firms for goods and services. Firms supply households with goods and services. The purchase and supply of goods and services takes place in the
a.
traditional market.
c.
product market.
b.
factor market.
d.
after market.
 

 24. 

How would the economy of Canada be likely to be characterized?
a.
mixed, but on the side of free market
b.
mixed, but on the side of centrally planned
c.
centrally planned
d.
free market
 

 25. 

How could the Chinese economy be characterized?
a.
centrally planned
b.
free market
c.
mixed, but on the side of free market
d.
mixed, but on the side of centrally planned
 

 26. 

Which of the following is NOT characteristic of a centrally planned economy?
a.
Each person is assigned a job.
b.
The central government makes all economic decisions.
c.
Each collective or factory sets its own goals.
d.
The central government owns all land and capital.
 

 27. 

What does the process of specialization do for an economy?
a.
It eliminates unemployment.
c.
It fosters competition.
b.
It makes it more efficient.
d.
It makes it easier to control.
 

 28. 

Which of the following goals is difficult to achieve in a pure free market system?
a.
economic freedom
c.
economic efficiency
b.
economic growth
d.
economic equity
 

 29. 

In which of the following lists of mixed economies does the market system dominate?
a.
Russia, Peru, France, Canada
b.
Cuba, Greece, China, United States
c.
United States, United Kingdom, Singapore, Hong Kong
d.
France, Canada, South Africa, United Kingdom
 

 30. 

Who was the leader that introduced communism and central planning to the former Soviet Union?
a.
Karl Marx
c.
Joseph Stalin
b.
Vladimir Lenin
d.
Friedrich Engels
 

 31. 

What incentive motivates a manufacturer to sell a product?
a.
popularity of the product
c.
making profits on sales
b.
putting others out of business
d.
pleasing the consumer
 

 32. 

Suppose there is a family in which all the boys are expected to become farmers when they are adults, just as their fathers and grandfathers did. In which kind of economy do they participate?
a.
false economy
c.
command economy
b.
traditional economy
d.
centrally planned economy
 

 33. 

A government prints and distributes posters to inspire workers to increase their productivity. In which kind of economy does this most likely take place?
a.
centrally planned economy
c.
market economy
b.
traditional economy
d.
weak economy
 

 34. 

Which of the following is NOT a weakness of centrally planned economies?
a.
Most workers lack job security.
b.
Workers lack incentives to be innovative.
c.
Individual freedoms are sacrificed for societal goals.
d.
Consumers’ needs are generally not met.
 

 35. 

What is the function of an economic system?
a.
to give all producers the same access to consumers
b.
to produce and distribute goods and services
c.
to make sure all people have equal access to goods
d.
to make sure people are paid for their labor
 

 36. 

Collectives in the Soviet Union were inefficient producers of agricultural products. Why?
a.
The farms were too small to produce substantial crops.
b.
Soviet central planners ignored the farms in favor of factories producing consumer goods.
c.
Farm workers had guaranteed incomes, so they had few incentives to produce more or better crops.
d.
Most farmers were poor and had to pay for their own equipment, seeds, and fertilizer out of their own pockets.
 

 37. 

Which of the following is characteristic of a traditional economy?
a.
Children tend to have the same jobs as their parents did.
b.
They have a high standard of living.
c.
Communities tend to be fast-growing.
d.
They are usually based on light industrial production.
 

 38. 

Which of the following is NOT a key economic question?
a.
What goods and services should be produced?
b.
How should these goods and services be produced?
c.
Who consumes these goods and services?
d.
How should it be ensured that goods and services are paid for?
 

 39. 

Which of the following does a government provide as part of a safety net for the people?
a.
regulation of commerce
c.
general elections every four years
b.
unemployment compensation
d.
a strong military defense
 

 40. 

What is an important advantage of a free market?
a.
It does not change unless the government directs it.
b.
It is easy to regulate.
c.
It protects the less fortunate.
d.
It offers a wide variety of goods and services.
 

 41. 

What is one of the most important advantages of a free market?
a.
It encourages growth.
c.
It protects the less fortunate.
b.
It is easy to regulate.
d.
It can change rapidly.
 

 42. 

What is the motivating force behind the free market?
a.
the invisible hand
c.
specialization
b.
self-interest
d.
competition
 

 43. 

What incentive do manufacturers have to sell their products?
a.
putting others out of business
c.
making profits on sales
b.
popularity of the product
d.
pleasing the consumer
 

 44. 

What is the purpose of competition?
a.
to cause producers to attempt to put each other out of business
b.
to act as a motivating force behind the free market
c.
to act as a regulating force in the marketplace
d.
to cause buyers to have to be careful about spending their money
 

 45. 

What might be a hardship for citizens of a centrally planned economy making a transition to a market-based system?
a.
Only poor quality goods would be available to consumers, because manufacturers focused on quantity, not quality.
b.
Workers would lose job security and guaranteed incomes.
c.
Entrepreneurs would have fewer opportunities to start new businesses.
d.
Farmers would have to grow the crops that the government instructed them to.
 

 46. 

The economy of China is in transition. What does this mean?
a.
The economy is moving from central planning toward a market-based system.
b.
Investments are determined by state control instead of by private decision.
c.
Individual firms are in the process of being sold to the state.
d.
The government rarely interferes in the free market and is highly receptive to foreign investment.
 

 47. 

Which of the following is a condition that most people would NOT expect the safety net of the government to provide for?
a.
joblessness
c.
natural disasters
b.
injuries
d.
low income
 

 48. 

In what kind of an economy does the government make all the decisions?
a.
centrally planned
c.
free enterprise
b.
socialist
d.
laissez faire
 

 49. 

Why does even a free market economy need some government intervention?
a.
to make sure that the government can fulfill its needs for military personnel
b.
so that the government has some control over factor resources
c.
to ensure that the government has the freedom to tax as necessary
d.
to provide for things that the marketplace does not address
 

 50. 

What is the product market?
a.
the market in which households purchase the goods and services that firms produce
b.
the market in which firms purchase the factors of production from households
c.
the market in which payments are received for selling products to consumers
d.
the market in which income is received for supplying land, labor, or capital
 



 
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