Question 1

Capitalism is an economic system that:
A) produces more capital goods than consumer goods.
B) produces more consumer goods than capital goods.
C) is characterized by government control of markets.
D) gives private individuals and corporations the right to own productive resources.

Accepted Answer

Capitalism is an economic system that gives private individuals and corporations the right to own productive resources. It is based on the principles of private property, free markets, and competition. The government does not control the markets, but rather allows individuals and corporations to make their own decisions regarding what goods and services to produce, how to produce them, and at what price to sell them. The goal of capitalism is to maximize profits for the owners of productive resources, which in turn is believed to lead to economic growth and prosperity for society as a whole.

Question 2

The economy of North Korea would best be classified as:
A) a laissez-faire economy.
B) a command system.
C) a capitalist economy.
D) a market system.

Accepted Answer

The economy of North Korea is primarily a command system, also known as a planned economy, where the government controls most aspects of economic activity, including production, distribution, and prices. It is characterized by a lack of private enterprise, limited foreign trade, and strict government control over resources and the labor force.

Question 3

As of 2012,the economy of Hong Kong most closely approximates:
A) socialism.
B) a command economy.
C) pure capitalism.
D) a market economy.

Accepted Answer

The economy of Hong Kong is characterized by a high degree of free-market capitalism, with minimal government intervention and regulation. This has led to a highly competitive and efficient economy, with a strong focus on international trade and financial services. Therefore, the most accurate characterization of the economy of Hong Kong is a market economy.

Question 4

In a market system,well-defined property rights are important because they:
A) reduce unnecessary investment.
B) limit destructive economic growth.
C) create economic problems.
D) encourage economic activity.

Accepted Answer

Well-defined property rights encourage economic activity because individuals and businesses have a clear incentive to invest in and develop their property. This leads to greater productivity, innovation, and economic growth overall.

Question 5

The economy of Cuba most closely approximates:
A) laissez-faire capitalism.
B) a command economy.
C) pure capitalism.
D) a market economy.

Accepted Answer

The economy of Cuba is a command economy, meaning the central government makes all economic decisions, allocates resources, and sets prices. Private enterprise is limited, and the government owns and controls much of the means of production.

Question 6

The economy of Australia would best be classified as:
A) a command system.
B) socialism.
C) pure capitalism.
D) a market system.

Accepted Answer

The economy of Australia is considered a market system, also known as capitalism, in which the majority of economic decisions are made by individuals and businesses rather than the government. Australia’s economy is mainly driven by agriculture, mining, and service sectors. The government intervention is relatively low, and the market forces of supply and demand play a significant role in shaping the economy.

Question 7

Economic systems differ according to what two main characteristics?
A) Ownership of resources and methods of coordinating economic activity
B) Quantity of output produced and who receives the output
C) Who produces the output and what technology is used to produce it
D) The system of government and the quantity of natural resources available

Accepted Answer

Economic systems are primarily distinguished by the ownership of resources (i.e. whether they are owned by individuals or the state) and the methods used for coordinating economic activity (i.e. whether they are planned or market-based). B and C may be relevant factors in economic systems, but they are not the main characteristics that distinguish one system from another. D is not necessarily a relevant factor in economic systems, as some countries may have a system of government that is separate from their economic system, and the quantity of natural resources available does not necessarily determine the economic system in place.

Question 8

Which statement best describes a capitalist economy?
A) The production of goods and services is determined primarily by markets,but the allocation of goods and services is determined primarily by government.
B) The production of goods and services is determined primarily by government,but the allocation of goods and services is determined primarily by markets.
C) The production and allocation of goods and services is determined primarily through markets.
D) The production and allocation of goods and services is determined primarily through government.

Accepted Answer

In a capitalist economy, the production and allocation of goods and services are determined primarily through markets, without significant government intervention or control. The role of the government is generally limited to enforcing laws and regulations that protect property rights and ensure competition. Therefore, choice C is the best description of a capitalist economy.

Question 9

The market system is characterized by:
A) extensive government constraints on individual behavior.
B) private ownership of the means of production.
C) government control of all production decisions.
D) government rationing of all goods and services.

Accepted Answer

The market system is characterized by private ownership of the means of production, where individuals and firms own and control resources and make production decisions based on market forces of supply and demand. It is a decentralized system that operates without extensive government constraints on individual behavior or government control of all production decisions. Government may play a role in regulating certain aspects of the market system, but it is not the primary decision-maker or allocator of resources in a free market economy. Government rationing of goods and services is typically associated with command economies or wartime situations, rather than with a market system.

Question 10

Legal and social rules that affect the ownership of property are:
A) property rights.
B) the coincidence of wants.
C) the division of labor.
D) the freedom of enterprise.

Accepted Answer

Property rights refer to the legal and social rules that affect the ownership of property. These rules determine how property can be acquired, used, transferred, and protected. They also establish the obligations of the property owner towards others, and the rights of others towards the property owner. The other choices are economic concepts that are not directly related to property ownership.

Question 11

The institution of private property encourages:
A) lack of maintenance because people are not forced by law to do it.
B) lack of easy exchange because ownership is sometimes hard to prove.
C) easy exchange of some property because a formal title or deed exists.
D) lack of incentives because the owner is responsible for maintenance costs.

Accepted Answer

The existence of a formal title or deed in private property creates an easy exchange system as it legitimizes the ownership and makes it transferable to other people or entities.

Question 12

Which statement best describes a command economy?
A) The production of goods and services is determined primarily by markets,but the allocation of goods and services is determined primarily by government.
B) The production of goods and services is determined primarily by government,but the allocation of goods and services is determined primarily by markets.
C) The production and allocation of goods and services is determined primarily through markets.
D) The production and allocation of goods and services is determined primarily through government.

Accepted Answer

A command economy is an economic system in which production and allocation of goods and services are determined primarily through government. The government controls what goods and services are produced, how much is produced, and at what price they are sold. This system is also known as a centrally planned economy.

Question 13

The market system is an economic system that:
A) produces more consumer goods than capital goods.
B) produces more capital goods than consumer goods.
C) gives private individuals and institutions the right to own resources used in production.
D) gives the government the right to tax individuals and corporations for the production of capital goods.

Accepted Answer

The market system, also known as capitalism or a free market economy, is characterized by private ownership of resources used in production. This means that individuals and institutions have the right to own land, labor, capital, and entrepreneurship and use it to produce goods and services. The government's role in a market system is to enforce property rights and contracts, but it does not have the right to tax for the sole purpose of producing capital goods. While the market system may produce either more consumer or capital goods depending on the demands of the consumers and investors, it is not a defining characteristic of the system.

Question 14

The Soviet Union economy of the 1980s would best be classified as:
A) a market system.
B) pure capitalism.
C) laissez-faire capitalism.
D) a command system.

Accepted Answer

The Soviet Union economy of the 1980s was a command system where the government controlled all aspects of the economy, including production and distribution of goods and services. There was no private ownership or competition.

Question 15

A basic characteristic of a command system is that:
A) wages paid to labor are higher.
B) government owns most economic resources.
C) markets function mostly free from government intervention.
D) government planners play a limited role in deciding what goods will be produced.

Accepted Answer

In a command system, the government owns most or all of the economic resources and controls the production and distribution of goods and services. Government planners play a central role in deciding what goods will be produced, how much will be produced, and at what price. This is in contrast to a market system, where the allocation of resources is determined by the interactions of buyers and sellers in the marketplace.

Question 16

In a capitalistic economy:
A) consumers are not sovereign.
B) markets are not competitive.
C) there is a reliance on the market system.
D) the government owns the means of production.

Accepted Answer

In a capitalistic economy, there is a reliance on the market system, meaning that the economy is driven by the buying and selling activities of individuals and businesses. Consumers have the power to dictate what goods and services they want to purchase, making them sovereign. Markets are typically competitive, with many businesses offering similar products or services. The government does not own the means of production in a capitalist economy.

Question 17

Which is a major feature of the market system?
A) Government-established prices in all markets
B) Reallocation of all resources from private to public uses
C) The right to own private property and control resource uses
D) Central planning by government to provide goods and services

Accepted Answer

The right to own private property and control resource uses is a defining feature of the market system. This allows individuals and businesses to make their own decisions about what to produce, how to produce it, and for whom to produce it, leading to a decentralized economic system. The other options go against the principles of the market system, which emphasizes private ownership and free exchange without government intervention.

Question 18

Another term for capitalism is the:
A) command system.
B) socialist economy.
C) market system.
D) system of inputs and outputs.

Accepted Answer

Capitalism is often described as the market system, referring to the role of free markets in determining prices, allocation of resources, and distribution of goods and services. Option A refers to a centrally planned economy, while option B refers to a system in which the means of production are collectively owned and controlled by the workers or the state. Option D is not a commonly used term to describe economic systems.

Question 19

Which would not be characteristic of a capitalist economy?
A) Government ownership of the factors of production
B) Competition and unrestricted markets
C) Reliance on the market system
D) Free enterprise and choice

Accepted Answer

Capitalism is typically based on private ownership of the factors of production, such as land, labor, and capital. Government ownership would be more characteristic of a socialist or communist economy.

Question 20

The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of:
A) a command system.
B) a market system.
C) communism.
D) socialism.

Accepted Answer

The private ownership of property resources and the use of prices to direct and coordinate economic activity are key characteristics of a market system. In a market system, individuals and businesses make decisions based on their own self-interest, and the interaction of buyers and sellers in markets determines the prices and quantities of goods and services produced. This is in contrast to a command system, such as communism or socialism, where the government controls the allocation of resources and production decisions.

Quiz 2: The Market System and the Circular Flow

Capitalism is an economic system that:

The economy of North Korea would best be classified as:

As of 2012,the economy of Hong Kong most closely approximates:

In a market system,well-defined property rights are important because they:

The economy of Cuba most closely approximates:

The economy of Australia would best be classified as:

Economic systems differ according to what two main characteristics?

Which statement best describes a capitalist economy?

The market system is characterized by:

Legal and social rules that affect the ownership of property are:

The institution of private property encourages:

Which statement best describes a command economy?

The market system is an economic system that:

The Soviet Union economy of the 1980s would best be classified as:

A basic characteristic of a command system is that:

In a capitalistic economy:

Which is a major feature of the market system?

Another term for capitalism is the:

Which would not be characteristic of a capitalist economy?

The private ownership of property resources and use of prices to direct and coordinate economic activity is characteristic of: