Deck 22: Economies in Transition

Question 1

Which of the following are weaknesses of a command-based economic system? ​

A) ​It is not possible for goods to be allocated based on need rather than based on willingness and ability to pay.
B) ​Producers have incentives to innovate because successful innovators are not rewarded with higher profit.
C) ​Since price is set by central planners, price cannot freely adjust to resolve shortages or surpluses based on current supply and demand conditions.
D) ​Answers b. and c. above are correct.

Answer 1

D

Question 2

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.

Answer 2

B

Question 3

Proponents of a command economy argue that it promotes:

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

Answer 3

B

Question 4

The economic system that answers the What, How and For Whom questions using prices is a:

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

Question 5

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 the above

Question 6

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 the above are true.

Question 7

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 the above statements is descriptive.

Question 8

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 9

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 the above.

Question 10

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 11

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 12

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 13

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 14

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.

Question 15

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 16

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 17

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 18

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 the above.

Question 19

Which of the following is a basic question 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 the above.

Question 20

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 people's committee or a dictator.

Question 21

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 22

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 university professors.
D) A central authority such as people's committee, a government agency, or a dictator.

Question 23

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 24

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 the above.

Question 25

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 26

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 27

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 28

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 29

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 30

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 31

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 32

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.
D) Since price is freely set based on supply and demand, there are few shortages or surpluses.

Question 33

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 34

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 35

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 36

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 37

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 38

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 39

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 40

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 41

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 42

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

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

Question 43

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 the above.

Question 44

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 45

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 46

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 47

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 48

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 49

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 are correct.

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 the above.

Question 51

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 52

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 53

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 54

In the real world, most economic systems are:

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

Question 55

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 56

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 57

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 58

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

A) capitalism.
B) socialism.
C) communism.
D) none of the above.

Question 59

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 60

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 the above.

Question 61

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.

Question 62

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 63

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 64

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

Question 65

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

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

Question 66

Karl Marx published:

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

Question 67

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

A) Steel.
B) Electricity.
C) Agriculture.
D) All of the above.

Question 68

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 a communist society.

Question 69

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 70

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 71

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 72

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.

Question 73

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 74

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 75

In a traditional economy, innovation is encouraged.

Question 76

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

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

Question 77

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 78

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 79

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

Question 80

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