Economic Systems Quiz

In a traditional economy, individuals’ occupations are most often determined by

• orders from government “central planners”

• independent contractors who try to outbid each other for labor contracts

• their parents’ and grandparents’ occupations

• the market forces of supply and demand

In a command economy, most economic activity is dictated by

• religious leaders representing the faith of the majority of the nation’s population

• custom; how things have been done in the past

• orders from government “central planners”

• choices made by individual producers and consumers, intended to serve their own self-interests

In a market economy, most economic activity is initiated by

• individual producers and consumers who are acting in their own self-interest

• government “central planners” who establish national priorities and set production goals to address those priorities

• "the elders," whose job it is to preserve cultural traditions

• the media

Which of the following is NOT a characteristic feature of a market economy?

• ownership of private property

• sellers are motivated by the opportunity to make a profit

• transactions between buyers and sellers are made through voluntary exchange

• government ownership of the most essential factors of production

In his book The Communist Manifesto, this man argued that in capitalist economies, ownership of the major industries would become increasingly concentrated in fewer and fewer hands.

• Adam Smith

• Karl Marx

• John Maynard Keynes

• Milton Friedman

In The Wealth of Nations, ____ explained his theory that, in a market economy, an invisible hand guides the market for goods and services.

• Karl Marx

• John Maynard Keynes

• Adam Smith

• Milton Friedman

"Free Riders" are ...

• People who benefit from a good or service without paying for it

• Money the government contributes to help cover the costs of private sector economic activity that benefits the public.

• Government "gifts" of money to American citizens, given without exchange for any goods or services

• The side effects of marketplace transactions that have "spilled over" to affect someone other than the buyer or seller involved in a transaction (these can be positive or negative)
  

"Transfer Payments" are ...

• People who benefit from a good or service without paying for it

• Money the government contributes to help cover the costs of private sector economic activity that benefits the public.

• Government "gifts" of money to American citizens, given without exchange for any goods or services

• The side effects of marketplace transactions that have "spilled over" to affect someone other than the buyer or seller involved in a transaction (these can be positive or negative)
  

"Externalities" are ...

• People who benefit from a good or service without paying for it

• Money the government contributes to help cover the costs of private sector economic activity that benefits the public.

• Government "gifts" of money to American citizens, given without exchange for any goods or services

• The side effects of marketplace transactions that have "spilled over" to affect someone other than the buyer or seller involved in a transaction (these can be positive or negative)
  

"Subsidies" are ...

• People who benefit from a good or service without paying for it

• Money the government contributes to help cover the costs of private sector economic activity that benefits the public.

• Government "gifts" of money to American citizens, given without exchange for any goods or services

• The side effects of marketplace transactions that have "spilled over" to affect someone other than the buyer or seller involved in a transaction (these can be positive or negative)