Ch. 2 Economic Systems Test

Which of the following is not one of the three basic questions every economy must address? a

• What should be produced?

• How should it be produced?

• When should it be produced?

• For whom should it be produced?

Society’s economic goals include all of the following except

• equity

• sustainability

• economic justice

• economic growth

People respond to incentives because

• incentives act as rewards that encourage people to behave in certain ways.

• incentives exploit opportunities to make people better off.

• incentives exploit opportunities to make people worse off.

• incentives discourage the use of free time.

The concept of equity focuses on

• how to produce the maximum possible output from a given amount of resources.

• how government can intervene to make markets work better.

• the issue of fairness

• the buildings and equipment an employer owns.

Which of the following is considered to be the main advantage of a market economy?

• equity

• sustainability

• economic security

• efficiency

If an economy makes all decisions based on custom and history, which of the following systems must be in effect?

• entrepreneurial economy system

• traditional economy system

• command economy system

• market economy system

Government’s role in a market economy would include all of the following except

• establishing and enforcing rules that improve market performance.

• providing important goods and services that private individuals tend not to purchase.

• shaping market outcomes to improve economic security, equity, and sustainability.

• providing complete equality of outcome for every individual.

A typical circular flow diagram would include

• stocks and bonds

• households and businesses.

• command and market economies.

• the role of incentives.

The market in which resources are exchanged for monetary payments is called the

• factor market.

• goods market

• services market

• public goods market

Which of the following correctly matches a factor of production with the corresponding factor payment?

• capital & interest

• money & interest

• labor & profit

• land & wages