Economics: Chapter 2 Test Review

Consumers in command economies have an unlimited amount of all goods available to them.

• True
• False

In a pure market economy, market forces coordinate production as if by an "invisible hand."

• True
• False

The United States is a mixed economy, but markets play a relatively large role.

• True
• False

A traditional economy is shaped largely by custom or religion.

• True
• False

Any movement along the PPF (production possibilities frontier) involves produce less of one good to produce more of the other.

• True
• False

An outward shift of the PPF (production possibilities frontier) reflects an economic downturn.

• True
• False

In a market economy, what rights give resource owners the freedom to use their resources as they see fit?

• monopoly rights
• voting rights
• property rights
• economic rights

Which of the following is NOT true of a pure market economy?

• resource owners have property rights
• markets are regulated by the government
• prices guide resources to the most productive use
• markets answer the what, how and for whom questions

An economic system is the set of mechanisms and institutions that resolve the what, how, and for whom questions that all economies must answer.

• True
• False

An economic system in which all resources are government-owned and all production is directed by the central plans of government is known as a 

• pure market economy
• mixed economy
• pure command economy
• monopoly economy