Deck 16: Economies in Transition

Question 1

Which of the following statements is true about a command economy?

A) Shortages occur because of complexities in the planning process.
B) Planners determine what, how many, and for whom goods and services are to be produced.
C) Planners often allocate goods and services through a rationing system.
D) The quality of produced goods and services tends to be inferior.
E) All of these are true.

Answer 1

E

Question 2

In a command economy, the basic economic questions are answered by:

A) central authority.
B) individual buyers and sellers.
C) the traditional methods.
D) none of these.

Answer 2

A

Question 3

Which of the following economic systems answers the basic economic questions by copying the previous generation?

A) Traditional economy.
B) Command economy.
C) Market economy.
D) Capitalism.

Answer 3

A

Question 4

Which of the following is a key criticism of the market economy as a system of allocation?

A) Goods and services are allocated unequally based on ability to pay.
B) Producers have strong incentives to innovate because successful innovators are rewarded with higher profit.
C) Consumers can transmit their preference for product quality and variety by way of their "dollar votes" cast in the marketplace. Since price is freely set based on supply and demand, there are few shortages or surpluses.
D) None of the above.

Question 5

In a market economy, the three economic questions are answered by which of the following?

A) Prices determined by the interaction of the forces of supply and demand.
B) A cartel of major transnational corporations, government agencies, and consumer advocates.
C) A trilateral commission of major corporations, the military, and elite university professors.
D) A central authority such as people's committee, a government agency, or a dictator.

Question 6

Proponents of a command economy argue that it promotes:

A) efficiency.
B) equity.
C) consumer sovereignty.
D) economic growth.

Question 7

In a command economy, the three economic questions are answered by which of the following? ​

A) ​The production and consumption choices made by sellers and buyers in decentralized markets.
B) ​A cartel of major transnational corporations, government agencies, and consumer advocates.
C) ​A trilateral commission of major corporations, elected officials, and economists.
D) ​A central authority such as a peoples' committee or a dictator.

Question 8

An economic system answers the ________, ________, and _________ questions.

A) ​when to produce, where to produce, why we should produce
B) ​wealth, greed, power
C) ​money, markets, the business cycle
D) ​what to produce, how to produce, for whom to produce

Question 9

The economic systems of the former Soviet Union, the People's Republic of China, and Cuba are best classified as:

A) traditional economies.
B) command economies.
C) market economies.
D) decentralized economies.

Question 10

Which of the following societies is the most likely to have a traditional economy?

A) The United States.
B) The Inuit (native people of Northern Canada).
C) Cuba under Castro's rule.
D) Modern-day Hong Kong.

Question 11

A principal feature of a command economy is that ____________.

A) production decisions are made by profit-maximizing firms.
B) there is a central planning board at the top, which transmits economic decisions down to the various producing and consuming units below.
C) consumers are allowed to determine that is produced based on their demand for goods and services.
D) regulatory agencies constrain the most egregious forms of market power in a market system of allocation.

Question 12

In the former Soviet economy, the supreme planning board that transmitted economic decisions down to producing and consuming units was called the:

A) Soviet Ministry.
B) Polit Bureau.
C) Gosplan.
D) Soviet Central Committee for Economic Planning.

Question 13

The economic system that answers the What, How and For Whom questions by central authority is a:

A) market economy.
B) command economy
C) traditional economy.
D) any of these

Question 14

An economic system is the organizations and methods used to determine:

A) what goods and services are produced.
B) how goods and services are produced.
C) for whom goods and services are produced.
D) all of these.

Question 15

Which of the following statements best describes the role played by prices in a command economy such as the former Soviet Union?

A) Prices were used to allocate resources.
B) Prices played the same role as in a market economy.
C) Prices were used to ration final goods and services but not to allocate resources.
D) None of these statements is descriptive.

Question 16

The economic system that has the benefit of cooperation among individuals but suffers from a lack of individual initiative that leads to greater production describes the:

A) market economy.
B) command economy
C) soviet economy.
D) traditional economy.

Question 17

The economic system that answers the What, How and For Whom questions using prices determined by the interaction of supply and demand is a:

A) market economy.
B) command economy
C) soviet economy.
D) traditional economy.

Question 18

The economic system that answers the What, How and For Whom questions the way they have always been answered is a:

A) market economy.
B) command economy
C) soviet economy.
D) traditional economy.

Question 19

Which of the following is a basic question answered by an economic system?

A) for whom goods and services are produced.
B) how goods and services are produced.
C) what goods and services are produced.
D) all of these.

Question 20

Who was one of the first proponents of employing market economies instead of command economies?

A) Robert Heilbroner.
B) Karl Marx.
C) Jeffrey Sachs.
D) Adam Smith.

Question 21

According to Adam Smith's invisible hand doctrine:

A) self-interest best serves the interests of society.
B) laissez faire must be improved by government intervention.
C) producers should serve the best interests of society.
D) only laissez faire mercantilism best serves the interests of society.

Question 22

Adam Smith's basic economic philosophy stated in The Wealth of Nations can be stated as:

A) laissez faire.
B) allow to act.
C) the least government is best.
D) all of these.

Question 23

What type of economic system is commonly described as being controlled by an "invisible hand"?

A) A traditional economy.
B) A command economy.
C) A market economy.
D) A communist economy.

Question 24

In a market economy, buyers and sellers communicate their intentions to one another through:

A) government planners.
B) negotiations overseen by government agencies.
C) elected officials.
D) prices.

Question 25

According to Adam Smith, the "invisible hand" refers to which of the following?

A) The "best interests of society (public interest) will occur as an outcome of the market process coordinating the self-interested interactions of buyers and sellers (private interest).
B) Government interference is the invisible hand of inefficiency.
C) Bribes and graft is the invisible hand of inefficiency.
D) The "best interests of society" will occur as an outcome of careful guidance by government authorities in allocating scarce goods and services.

Question 26

The father of modern economics that wrote The Wealth of Nations is:

A) Karl Marx
B) John Maynard Keynes
C) Adam Smith
D) Thorstein Veblen

Question 27

Which of the following is true in a market economy?

A) Central planners determine answers to the basic economic questions.
B) Resources are used efficiently.
C) The distribution of wealth is equal.
D) Information for production and distribution decisions pass directly to buyers from the government.

Question 28

In Adam Smith's competitive market economy, the question of what goods to produce is determined by:

A) the "invisible hand" of the price system.
B) businesses.
C) unions.
D) the government, through laws and regulations.

Question 29

What famous economist said, "By pursuing his own interest he (an individual) frequently promotes that of the society more effectually than when he really intends to promote it?"

A) Alfred Marshall.
B) Adam Smith.
C) Karl Marx.
D) Robert L. Heilbroner.

Question 30

Adam Smith's book, The Wealth of Nations, was published at the time of the:

A) War of 1812.
B) U.S. Declaration of Independence.
C) U.S. Civil War.
D) Great Depression.

Question 31

A strength of the market economy is that:

A) it results in an equal distribution of wealth.
B) resources are used efficiently.
C) planners rather than consumers determine answers to the basic economic questions.
D) information for production and distribution decisions passes directly from the government to buyers.

Question 32

In Adam Smith's competitive market economy, the question of what goods to produce is determined by the:

A) "invisible hand" of the price system.
B) "invisible hand" of government.
C) "invisible hand" of public interest.
D) "visible hand" of laws and regulations.

Question 33

An economic system that answers the What, How, and For Whom questions using prices determined by the interaction of the forces of supply and demand is a:

A) market economy.
B) command economy.
C) traditional economy.
D) none of these.

Question 34

Adam Smith's book The Wealth of Nations was published at the time of the:

A) Great Depression.
B) U.S. Declaration of Independence.
C) U.S. Civil War.
D) War of 1812.

Question 35

The economic system that is generally considered to be the most efficient at answering the What to produce and the How to produce questions is the:

A) market economy.
B) command economy
C) soviet economy.
D) traditional economy.

Question 36

In a market economy:

A) collective decision-making is more important than individual decision-making.
B) goods and services are distributed as if by an "invisible hand" to those who can not afford them.
C) profit provides an incentive to be productive.
D) the distribution of wealth is equitably distributed.

Question 37

Adam Smith wrote that the:

A) economic problems of eighteenth-century England were caused by free markets.
B) government should control the economy.
C) pursuit of private self interest promotes the public interest in a market economy.
D) public or collective interest is not promoted by people pursuing their self interest.

Question 38

Which of the following represents key strengths of the market economy as a system of allocation?​

A) ​Goods and services are allocated based on willingness and ability to pay,
Rather than based on need.
B) Producers have strong incentives to innovate because successful innovators
Are rewarded with higher profit.
C) Since price is freely set based on supply and demand, shortages and surpluses
Are minimized.
D) ​All of the answers above are correct.

Question 39

Adam Smith was an advocate of:

A) mercantilism.
B) a nation maximizing its stock of gold.
C) unrestricted or free trade.
D) the visible hand of public interest.

Question 40

Adam Smith, in his book, The Wealth of Nations, advocated:

A) socialism.
B) an economy guided by an "invisible hand."
C) government control of the "invisible hand."
D) the adoption of mercantilism.

Question 41

What famous economist said that the market economy seemed to be controlled by an invisible hand?

A) Alfred Marshall.
B) Adam Smith.
C) Karl Marx.
D) Robert L. Heilbroner.

Question 42

The economic system in which the basic economic questions are answered through markets with some government intervention is a:

A) command economy.
B) mixed economy.
C) market economy.
D) planned economy.

Question 43

Which of the following is not an idea advocated by Adam Smith?

A) Businesspersons conspiring to fix prices are a threat to the price system.
B) Pursuit of private self interest with an invisible hand is the best way to promote the public interest.
C) Government should control the economy.
D) The government should provide for national defense and little else.

Question 44

Which of the following statements is true?

A) The doctrine of laissez-faire advocates an economic system with extensive government intervention and little individual decision-making.
B) In capitalism income is distributed on the basis of need.
C) Adam Smith was the father of socialism.
D) Most real-world economies are mixed economic systems.
E) The "invisible hand" refers to government economic control.

Question 45

Property rights allowing individuals to own goods, services, and factors of production are most important in:

A) socialistic economies.
B) planned economies.
C) capitalistic economies.
D) command economies.

Question 46

Which of the following is a characteristic of capitalism?

A) Equality of income.
B) Government decision-making is preferred to decentralized decision-making.
C) Market determination of prices and quantity.
D) Government ownership of all capital.

Question 47

Which of the following is one common criticism of capitalism?

A) Poor product quality and little product diversity.
B) Inefficiency of nationalized industries.
C) Inability to adjust quickly to changing economic conditions.
D) Inadequate environmental protection.

Question 48

Which of the following statements is true?

A) The doctrine of laissez-faire advocates an economic system with extensive government intervention and little individual decision-making.
B) In capitalism income is distributed on the basis of need.
C) Adam Smith was the father of socialism.
D) Most real-world economies are mixed economic systems.
E) The "invisible hand" refers to government economic control.

Question 49

An economic system characterized by private ownership of the factors of production and economic activity coordinated through a system of markets and prices is called:

A) capitalism.
B) socialism.
C) communism.
D) none of these.

Question 50

Which of the following economies is an example of a mixed system?

A) The United States.
B) The United Kingdom.
C) Sweden.
D) All of these.

Question 51

In the real world, most economic systems are:

A) market economies.
B) command economies
C) mixed economies.
D) traditional economies.

Question 52

The economic system characterized by private ownership of resources and market is:

A) capitalism.
B) communism.
C) fascism.
D) socialism.

Question 53

Which of the following is a criticism of capitalism?

A) Unequal distribution of income.
B) Failure to protect the environment.
C) Exploitation of workers.
D) All of these.

Question 54

Which of the following is not a characteristic of capitalism?

A) Private ownership of the factors of production.
B) Businesses make their own product and price decisions.
C) Public ownership of the factors of production.
D) Decentralized decision-making using markets.

Question 55

According to Adam Smith, what is the primary source of a nation's wealth?

A) The amount of gold and silver in the government's possession.
B) A spirit of cooperation in which people share according to their means.
C) Strong central planning authorities.
D) The people's ability to produce products and trade in free markets.

Question 56

Which of the following is a characteristic of capitalism?

A) Government ownership of all capital.
B) Government decision-making is preferred to decentralized decision-making.
C) Market determination of prices and quantity.
D) Equality of income.

Question 57

Most of the world's economies are mixed economies because _________.

A) a cartel of powerful transnational firms demands it.
B) the market system of allocation is always best.
C) the command system of allocation is always best.
D) government intervention in an overall market system exists because markets fail when there is market power, a great deal of inequality, pollution externalities, or public goods.

Question 58

The term "capitalism" refers to which of the following?

A) A religion based on amassing capital.
B) An economic system characterized by private ownership of resources, and decentralized market allocation.
C) An economic system characterized by government ownership of resources and centralized allocation.
D) None of the above answers are correct.

Question 59

The freedom of consumers to cast their dollar votes to buy, or not to buy, at prices determined in competitive markets describes:

A) socialism.
B) communism.
C) consumer sovereignty.
D) the aspirations of Karl Marx.

Question 60

Which of the following is not a characteristic of capitalism?

A) Private ownership of resources.
B) Decentralized decision-making using markets.
C) Representative democracy.
D) Consumer sovereignty.

Question 61

In a socialistic system, most economic decisions are made by:

A) firms.
B) consumers.
C) stockholders.
D) government planners.

Question 62

Which of the following statements is true?

A) The United States today comes closer to the socialist form of economic organization than it does capitalism.
B) When central planners set prices above equilibrium for goods and services they create shortages.
C) According to Karl Marx, under capitalism, workers would be exploited and would revolt against the owners of capital.
D) Adam Smith argued that government's role in society would be to do absolutely nothing.

Question 63

In a command economy, resources are publicly owned by government and economic activity is coordinated through a central government planning authority.

Question 64

Socialism is correctly described by which of the following statements?

A) Central planning is used exclusively to answer the basic economic questions.
B) Markets are used exclusively to answer the basic economic questions.
C) Tradition is used exclusively to answer the basic economic questions.
D) Government ownership of many resources and centralized decision-making answers the basic economic questions.

Question 65

Karl Marx published:

A) Das Kapital.
B) General Theory of Communism.
C) The Wealth of Nations.
D) Capitalist Manifesto.

Question 66

Socialism is an economic system characterized by:

A) private ownership of resources and market decision-making.
B) government ownership of resources and centralized decision-making.
C) cooperation, sharing, and little central government.
D) a complex structure of rules and traditions that dictates decision-making.

Question 67

The term "socialism" refers to which of the following?

A) A religion centered on community interaction.
B) An economic system characterized by private ownership of resources, and decentralized market allocation.
C) An economic system characterized by government ownership of resources and centralized allocation.
D) None of the above answers are correct.

Question 68

Under socialism, factories, farms, mines, and natural resources are owned by:

A) laborers.
B) government.
C) private stockholders.
D) no one.

Question 69

A traditional system solves basic economic questions by long-standing customs.

Question 70

In Marx's ideal communist society, the state:

A) actively promotes income incentives.
B) follows the doctrine of laissez faire.
C) owns resources and conducts planning.
D) does not exist.

Question 71

Karl Marx was a(n):

A) 19th century German philosopher.
B) 18th century Russian economist.
C) 14th century Polish banker.
D) 19th century Russian journalist.

Question 72

In a traditional economy, innovation is encouraged.

Question 73

Under socialism, which of the following industries would probably be owned by the government?

A) Steel.
B) Electricity.
C) Agriculture.
D) All of these.

Question 74

Which of the following is a correct characterization of socialism?

A) Tradition answers the basic economic questions.
B) Markets are used exclusively to answer the basic economic questions.
C) Central planning is seldom used to answer the basic economic questions.
D) Government ownership of many resources and centralized decision-making answers the basic economic questions.

Question 75

Which nation achieved the ideal communist society as described by Marx?

A) Castro's Cuba.
B) Mao's China.
C) Stalin's Soviet Union.
D) No nation has achieved Marx's vision of communist society.

Question 76

In traditional economies, people base economic decisions on the precedents established by previous generations.

Question 77

Which of the following is a characteristic of socialism?

A) Rejection of central planning.
B) Government ownership of all factors of production.
C) Government ownership of most of the factors of production.
D) Private ownership of all factors of production.

Question 78

A traditional system operates based on the self interest of buyers and sellers.

Question 79

A classless society and economic system where all the factors of production are owned by workers and people share production according to their needs describes:

A) capitalism.
B) communism.
C) the invisible hand.
D) a mixed economy.

Question 80

Which of the following applies to a real-world socialistic economy?

A) Private ownership of all factors of production.
B) Government ownership of all factors of production.
C) Government ownership of most of the factors of production.
D) Lack of central planning.