Basics of Economics

Which type of economic system is based on customs and beliefs?

• traditional economy
• mixed economy
• command economy
• market economy
  

Who answers all economic questions in a market economy?

• religious authorities within individual communities
• the government
• national legislatures
• individual citizens (producers + consumers)
  

Who makes all economic decisions in a command economy?

• individual citizens (producers + consumers)
• national legislatures
• religious authorities within individual communities
• the government
  

"Country X" has an economic system in which individual citizens and the government share responsibility in answering economic questions. This is an example of a:

• traditional economy

• market economy

• mixed economy

• command economy

How does specialization assist the economies of all countries?

• It restricts trade between countries.
• It motivates countries to migrate closer to command economies.
• It encourages trade between countries.
• It does not affect trade between countries.
  

What is a tariff?

• a tax placed on imports
• the refusal to cooperate with other countries in a specific region
• a limit on trade
• a limit on imports from other nations
  

A quota is:

• the refusal to cooperate with other countries in a specific region
• a limit on imports from other nations
• a limit on trade
• a tax placed on imports
  

"Country M" has severely limited its trade with "Country N."  Which type of trade barrier does this describe?

• a tariff
• a quota
• a subsidy
• an embargo
  

Which statement best explains the difference between tariffs and quotas?

• Tariffs are a ban on trade, whereas quotas lower prices.
• Tariffs are a tax added to imports, while quotas are a ban on trade.
• Tariffs are a tax added to imports, whereas quotas set limits on imports.
• Tariffs set limits on imports, whereas quotas are a tax added to imports.

How does specialization encourage trade between countries?

• Countries cannot specialize in all products, so they trade for what they need and want.
• Countries must specialize in more than fifty percent of the products they produce for export.
• Countries are allowed to become experts in all products, so they do not need to trade for goods.
• Countries are allowed to decide what to produce, how to produce, and for whom to produce.