Free Enterprise & other Economic Systems Pt1

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 of the following describes the benefits of specialization in a free market?

• Specialization leads to higher prices.

• Specialization leads to decreased competition among producers.

• Specialization leads to lower overall output.

• Specialization leads to efficient use of capital, land, and labor.

How do self-interest and competition affect free markets?

• They work together to keep prices high.

• They work together to regulate supply, demand, and prices.

• They represent the opposing interests of consumers and producers.

• They help level the playing field between efficient and inefficient producers.

Which of the following is an explanation of what Adam Smith called the “invisible hand” of the marketplace?

• Advertising causes consumers to desire products that they otherwise would not want.

• Government regulations influence the decisions of consumers and producers in the market.

• Self-interest, competition, and incentives promote smoothly running markets.

• Unforeseen events disturb supplies of goods and services and affect prices in the marketplace.

Key advantages of free market economic systems include

• rising prices, specialization, negative incentives, and multiple markets.

• online markets, producer sovereignty, self-interested consumers, and low prices.

• economic efficiency, economic freedom, economic growth, and variety of goods.

• positive incentives, negative incentives, specialized consumers, and efficient labor.

In a free market system, the concept of consumer sovereignty means that

• consumers have the power to decide through their actions what goods and services get produced.

• producers are in an ongoing struggle with consumers over control of the marketplace.

• government must intervene to ensure fair competition between consumers and producers.

• consumers are not bound to accept the positive incentives offered by producers.