Resource Allocation and Economic Systems

Which of the following best captures the three economic questions every economic system must answer?

• what, when, and why?

• what, how, and when?

• what, how, and for whom?

• when, where, and why?

• how much, how often, and for whom?

When a firm decides on the right mix of capital and labor to use, which of the three basic economic questions does it answer?

• Is this a good way to allocate services?

• How should it be produced?

• Who should get the goods produced?

• Is it fair to deny services?

• What should be produced?

When a government decides only people who have paid an annual fee will get certain services, such as firefighting services, which of the three economic questions does it answer?

• Is this a good way to allocate services?

• How should it be produced?

• Who should get the goods produced?

• Is it fair to deny services?

• What should be produced?

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

• Production decisions are centrally coordinated

• Allocation decisions are centrally coordinated

• Prices serve as signals to allocate resources

• Capital and labor are allocated based on a centralized plan

• The factors of production are collectively owned

Which of the following are features of a market economy but not a command economy?

• Decisions about how production is allocated to households are determined by a central authority.

• Prices are set by a central authority.

• Buyers and sellers rely on prices created in markets to provide information about the relative value of goods, services, and resources.

• Resources are allocated by a central authority.

• Decisions about what is produced are determined by a central authority.

Which of the following are key differences between market economies and command economies?

• Resources are all owned by the government in a market economy.

• There is a winner and a loser in every exchange in a market economy.

• Money is used to facilitate exchanges in market economies, but not command economies.

• The government makes all decisions about resource allocation in a market economy.

• Resources are owned by private individuals, rather than by the government, in a market economy.

In the nation of Hamsterville most goods, services, and resources are allocated in markets. However, some goods are provided by the government, such as healthcare and education.

What kind of economic system does Hamsterville have?

• pure command economy

• pure market economy

• a mixed economy

• pure capitalist system

• communist