Chapter 2

Which of the following in NOT characteristic of a centrally planned economy?

• Each collective or factory sets its own goals

• The central government makes all economic decisions

• The central government owns all land and capital

• Each person is assigned a job

What is the struggle among various producers for the consumer’s business called?

• socialism

• competition

• incentive

• self-regulation

Why does even a free market economy need some government intervention?

• to provide for things that the marketplace does not address

• to make sure that the government can fulfill its needs for military personnel

• to ensure that the government has the freedom to tax as necessary

• so that the government has some control over factor resources

Which of the following is NOT a key economic question?

• Who consumes these goods and services?

• What goods and services should be produced?

• How should these goods and services be produced?

• How should it be ensured that goods and services are paid for?

What does the process of specialization do for an economy?

• It eliminates unemployment.

• It fosters competition.

• It makes it more efficient.

• It makes it easier to control.

How could the Chinese economy be characterized?

• centrally planned

• mixed, but on the side of centrally planned

• free market

• mixed, but on the side of free market

What is one of the most important advantages of a free market?

• It can change rapidly.

• It is easy to regulate.

• It protects the less fortunate.

• It encourages growth.

What incentive motivates a manufacturer to sell a product?

• making profits on sales

• putting others out of business

• pleasing the consumer

• popularity of the product

Which of the following was a free market philosopher?

• Karl Marx

• Adam Smith

• Vladimir Lenin

• Friedrich Engels

What is the product market?

• the market in which payments are received for selling products to consumers

• the market in which income is received for supplying land, labor, or capital

• the market in which firms purchase the factors of production from households

• the market in which households purchase the goods and services that firms produce