Economic Systems Quiz

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

• orders from government “central planners”

• independent contractors who try to attract the best workers by offering higher wages than the others

• their parents’ and grandparents’ occupations

• the invisible hand

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

• families or clans, determined to preserve the traditions of their ancestors, who encourage members to “follow in the footsteps” of their parents, grandparents, etc.

• 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 an invisible hand guides the market for goods and services.

• Karl Marx

• John Maynard Keynes

• Adam Smith

• Milton Friedman

What term describes side effects of transactions that affect someone other than the buyer or seller involved?

• Free rider

• Transfer payment

• Subsidies

• Externalities

Who is a person that benefits from a good or service without paying for it?

• Externality

• Free rider

• Subsidy

• Transfer payment

What is the term for government assistance that helps cover the cost of private sector economic activity?

• Externalities

• Free rider

• Subsidies

• Transfer payment

What are government "gifts" of money to citizens without exchange for goods or services called?

• Externalities

• Free rider

• Subsidies

• Transfer payment