Economic Systems

In a bustling city like New York, what principle is the economic activity primarily based on?

• Private enterprise

• International regulations

• Government ownership

• Public voting

Answer explanation

A market economy is based on private enterprise, where businesses and individuals own and control the production and distribution of goods and services.

Which of the following is an example of a free-market economy?

• Russia

• Australia

• Cuba

• North Korea

Answer explanation

Australia is an example of a free-market economy because it operates on the principles of supply and demand with limited government intervention.

In a bustling city market, what primarily decides the variety and quantity of fruits and vegetables available for sale?

• Demand by consumers

• Fixed production quotas

• Government plans

• International trade agreements

Answer explanation

The supply of goods and services in a market economy is determined by the demand of consumers, as they dictate what products and services are needed in the market.

In a command economy, who decides what goods and services will be produced?

• Individual consumers

• Private businesses

• The government

• Foreign investors

Answer explanation

In a command economy, the government decides what goods and services will be produced, making the correct answer choice 'The government'.

In comparing the economies of Country A, which operates under a free market system, and Country B, which has a command economy, what is a primary distinction?

• The degree to which the government determines economic activity

• The degree of technology used

• The amount of goods exported

• The level of consumer choice

Answer explanation

The primary distinction between a free and command economy is the degree to which the government determines economic activity.

In which type of economy does a tech startup have the freedom to operate and make decisions based on market demand?

• Planned economy

• Socialist economy

• Command economy

• Free-market economy

Answer explanation

The correct choice is a free-market economy, which is characterized by private ownership of production factors.

In the context of the United States, what role does the federal government play in its free-market economy?

• It sets the prices for all consumer products and services

• It ensures the enforcement of laws and provides public services

• It makes all the economic decisions for businesses and individuals

• It completely abstains from any form of economic intervention

Answer explanation

The government plays a role in maintaining the rule of law and providing public goods in a free-market economy, rather than controlling prices or all economic decisions.

Which of the following is NOT a characteristic of a planned economy?

• Government ownership of resources

• Free market competition

• Fixed prices set by the government

• Production based on government goals

Answer explanation

The correct choice is 'Free market competition' because it is not a characteristic of a planned economy, which typically involves government control over resources, prices, and production goals.

Imagine you're looking to buy a new smartphone. What feature of the smartphone market ensures you have multiple options to choose from?

• Only one company makes smartphones

• A large number of companies produce and sell smartphones

• The government decides the price of all smartphones

• Only a few people are allowed to buy smartphones

Answer explanation

A key feature of a competitive market is a large number of buyers and sellers, promoting competition and preventing any single entity from having significant market power.

In a country where healthcare and education are provided for free by the government, what type of economy is this an example of?

• Mixed economy

• Barter economy

• Command economy

• Free-market economy

Answer explanation

In a command economy, some necessities are provided for free by the state, making it the correct choice for this question.