Topic 2.1 Three Basic Questions

How is a society’s economic system defined?

• by the decisions it makes about who consumes goods and services
• by the resources it uses to produce goods and services
• by the trade-offs it accepts in order to produce goods and services
• by how it answers the three basic economic questions

Distinguish Which economic goal reflects the desire of individuals to make their own choices about owning property or becoming entrepreneurs?

• freedom
• efficiency
• equity
• security

Which of the following BEST identifies how the three basic economic questions are answered in the United States?

• through the planning of government officials who manage the economy
• through a system in which individuals exchange goods directly with each other
• through the combined effect of the decisions of individuals in the marketplace
• through decisions made by small groups, based on habit, custom, or ritual

What are the three basic economic questions all societies must answer?

• Who gets to produce goods and services, who gets to consume them, and who collects the profits?
• Why should goods and services be produced, when should they be produced, and how should they be produced?
• Where should goods and services be produced, who should sell them, and who should get the profits?
• What goods and services should be produced, how should they be produced, and who will consume them?

The distribution of income received in the form of rent, wages, or interest is the main factor that determines

• how goods and services are produced
• where goods and services are consumed
• who produces goods and services
• who consumes goods and services

An economy that maximizes its scarce resources and can deliver the right goods in the right quantity to the right people at the right price has achieved which economic goal?

• efficiency 
• freedom
• security
• equity

How does innovation promote economic growth?

• by reinforcing traditional values in a society
• by introducing new goods and services that create new markets
• by ensuring people's freedom to make their own choices
• by rewarding the development of efficient technology

Which basic economic goal is most easily achieved in a traditional economy?

• equity
• innovation
• growth
• efficiency

Which basic economic question deals with the issue of where a person can afford to live?

• How should goods and services be produced?
• Who consumes the goods and services that are produced?
• Why should goods and services be produced?
• What goods and services should be produced?

This photograph represents the type and scale of economic activity that is typical of a

• centrally planned economy
• free market economy
• specialized economy
• traditional economy