Deck 3: The Mixed Economy

Question 1

Adam Smith believed that the best way to promote the public interest was to

A)have the government produce most goods and services.
B)let people pursue their own selfish interests.
C)wait for individuals to set out to promote the public interest.
D)get rid of the price mechanism.

Answer 1

let people pursue their own selfish interests.

Question 2

In order for the price mechanism to work, we need

A)To have the government regulate each industry.
B)Many competing firms in each industry.
C)To have only a few firms in each industry.
D)None of the choices are true.

Answer 2

Many competing firms in each industry.

Question 3

Which statement is false?

A)Under our economic system, most of the important decisions are made in the market place.
B)In our economy the price mechanism determines the answers to our three basic questions-what, how, and for whom.
C)Most economists would agree that the price system leads to a very efficient allocation of resources.
D)None of these statements are false.

Answer 3

None of these statements are false.

Question 4

In a centrally planned economy

A)consumers do not have to consider prices when shopping.
B)prices are zero.
C)the government sets prices and decides how much of each good is to be produced.
D)producers have an incentive to produce those goods most desired by consumers at the lowest cost.

Question 5

Which statement is false?

A)Under Soviet communism, government planning was substituted for the price mechanism.
B)The entire Soviet economy was a Rube Goldberg contraption of subsidies, fixed prices, bureaucratic rules and regulations, special privilege, and outright corruption.
C)Had Mikhail Gorbachev not begun dismantling the communist bureaucracy, the Soviet system probably would have been able to continue carrying on business as usual for another century.
D)None of the statements are false.

Question 6

Sweden and Norway would best be described as _______ countries.

A)Capitalist
B)Fascist
C)Communist
D)Socialist

Question 7

Which statement is true?

A)The communist system of state-owned enterprises in the Soviet Union was an example of pure communism.
B)Aside from Cuba, Vietnam, North Korea, and a few other very small nations, there are no other communist powers left in the world.
C)Mikhail Gorbachev still holds substantial power in Russia.
D)None of the statements are true.

Question 8

A person will do more good pursuing his own self-interest than if he consciously set out to promote the public good was the view of

A)Karl Marx.
B)John Maynard Keynes.
C)Mikhail Gorbachev.
D)Adam Smith.

Question 9

Which statement was true about China and the former Soviet Union in the 1970s and 1980s?

A)Both were good examples of pure communism.
B)Neither was a good example of pure communism.
C)The Soviet Union, but not China, was a good example of pure communism.
D)China, but not the Soviet Union, was a good example of pure communism.

Question 10

Private ownership of most of the means of production is common to

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

Question 11

Which statement is true?

A)American industry is very competitive.
B)There is no competition in American industry.
C)In order to have competition you need to have many firms in an industry.
D)The automobile and computer software industries are good examples of competition at work.

Question 12

Karl Marx said the people who control a society are the people who

A)run the government.
B)own the land.
C)own the plant and equipment.
D)work in the factories.

Question 13

A socialist economy is characterized by

A)an extensive reliance on markets to allocate final goods and services.
B)an extensive reliance on the profit motive to govern resource allocation decisions.
C)elimination of the problem of scarcity since all basic necessities are available to all citizens.
D)public ownership of productive resources.
E)high levels of unemployment and inflation.

Question 14

The role of _______ in the production process is central to why our country is rich and most of the rest of the world is poor.

A)Labor
B)Land
C)Capital
D)Government

Question 15

In the circular flow model, businesses

A)demand both products and resources.
B)supply both products and resources.
C)demand products and supply resources.
D)supply products and demand resources.

Question 16

Hitler's Germany was an example of a _________ economic system.

A)Capitalist
B)Fascist
C)Communist
D)Socialist

Question 17

The government performs each of the following economic functions except

A)collecting taxes.
B)spending.
C)issuing regulations.
D)operating the price mechanism.

Question 18

The main reason U.S. farmers can produce more than farmers in China is that they

A)have more land.
B)have more capital.
C)have more labor.
D)are better trained.

Question 19

Which statement was coined by Adam Smith?

A)By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it.
B)The factory owner, by paying his workers meager wages, is able to use this surplus to buy more capital goods.
C)The foundation of our economic system is socialist ownership of the means of production in the form of state property and collective farm and cooperative property.
D)None of these statements were coined by Adam Smith.

Question 20

The invisible hand is

A)Perfect competition.
B)The profit motive.
C)Government direction.
D)The mixed economy.

Question 21

Who said, "It is not the employer who pays wages; he only handles the money. It is the product that pays wages."

A)Henry Ford
B)Karl Marx
C)Jackson Martindell
D)Studs Terkel
E)Pierre-Joseph Proudhon

Question 22

The nation closest to a centrally planned, socialist economy is

A)China.
B)Japan.
C)the United States.
D)Norway.

Question 23

Which economic system is usually associated with government ownership of the means of production and central planning?

A)Communism
B)A market system
C)Mercantilism
D)Fascism
E)Capitalism

Question 24

In the United States and in most other developed capitalist economies, the government

A)typically plays a significant role in allocating resources and redistributing income.
B)serves to enforce property rights, but plays no role in the allocation of society's resources.
C)is primarily concerned with central planning.
D)employs less than 1% of the labor force.
E)None of the choices are true.

Question 25

In a pure capitalist economy, "what to produce" is determined by

A)government central planning committees.
B)the price mechanism.
C)the credo: "Each according to his ability, to each according to his needs".
D)all of the choices are true.

Question 26

"From each according to his ability; to each according to his needs" is from

A)The Communist Manifesto.
B)The Capitalist Manifesto.
C)The Socialist Manifesto.
D)The Fascist Manifesto.

Question 27

Karl Marx and Friedrich Engels believed that the ideal communist society would come about when

A)the state withered away.
B)the state gained control of the economy's means of production.
C)there was private ownership of the means of production.
D)all large corporations remained in private hands, but were regulated by the government.

Question 28

In the former Soviet Union distributing scarce consumer goods was accomplished by

A)higher prices which eliminated some potential consumers.
B)making the consumer stand in a long line for hours if not days.
C)the government simply printing more money.
D)None of the choices are true.

Question 29

Most economists in the U.S. believe that the price mechanism leads to

A)an efficient allocation of resources.
B)an equitable distribution of income.
C)both an efficient allocation of resources and an equitable distribution of income.
D)neither an efficient allocation of resources nor an equitable distribution of income.

Question 30

Which statement is true?

A)In China today, the private sector produces no more than 10% of the country's goods and services.
B)Under communism in the Soviet Union, the private sector was almost as large as the government sector.
C)In the American economy today, the public sector is almost as large as the private sector.
D)All of the statements are true.
E)None of the statements are true.

Question 31

How did the Soviet model of communism compare to that of Karl Marx?

A)The models were identical.
B)The Soviet model was faithful to the Marxian model, but it had been modified slightly over the years.
C)What the Soviets were operating all these years was a classic capitalist model.
D)While there was public ownership of the means of production, there did not appear to be a very close resemblance to the Marxian model.

Question 32

In a capitalistic economic system, who owns most of the nation's resources?

A)Labor unions
B)The government
C)Private individuals
D)No one

Question 33

Which statement is most accurate?

A)By the mid 1980s, over 90 percent of China's agricultural land was farmed by private households.
B)China has virtually no private sector.
C)Although China's agricultural sector is market oriented, its industrial sector still uses the communist model.
D)China's economy is almost entirely privately owned.

Question 34

Statement I: China's southern provinces have become "export platforms", sending out streams of consumer goods to Japan, Europe, and North America. Statement II: China has become a wealthy nation as a result of getting rid of its communist economic system.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 35

Economist John Kenneth Galbraith has argued that most prices in our mixed economy are set by

A)a government planning committee.
B)the invisible hand.
C)the nation's largest corporations.
D)consumers voting with their dollars.

Question 36

Under capitalism the role of government is best described as

A)Nonexistent.
B)Limited.
C)Significant.
D)Extensive.

Question 37

Each of these is a basic characteristic of a capitalist economy, except

A)the institution of private property.
B)central planning.
C)laissez-faire.
D)individuals acting in their own self-interest.

Question 38

Under a communist system,

A)consumer decisions are not influenced by prices.
B)resources are owned and controlled by the government.
C)individual freedom is maximized.
D)the market guides resources, but the state dictates what should be produced.

Question 39

In reality, all economic systems are

A)mixed.
B)command.
C)capitalistic.
D)democratic.
E)socialistic.

Question 40

Which is true about the means of production?

A)Under capitalism it is privately owned, and under fascism it is owned by the government.
B)Under fascism it is privately owned, and under capitalism it is owned by the government.
C)Under both capitalism and fascism it is owned by the government.
D)Under capitalism and fascism it is privately owned.

Question 41

Which of the following is NOT a characteristic of the capitalist form of economic organization?

A)Central planning.
B)A reliance on decentralized market processes for resource allocation purposes.
C)Private ownership of productive resources.
D)All of the choices are true.

Question 42

A nation which has many active free markets in which profits motivate sellers and also regulatory bureaucracies would be an example of

A)a free market.
B)a centrally planned economy.
C)a mixed economy.
D)an equitable economy.

Question 43

Which statement is the most accurate?

A)China is a completely economically backward nation.
B)China's economic growth has been extremely low for the last 20 years.
C)China is subjected to periodic famine.
D)Since 1978, Chinese leaders have relaxed rigid party control of the economy and permitted more individual initiative.

Question 44

Which statement is true?

A)Russia has embraced capitalism at a much faster rate than China.
B)The Russian government today is moving much closer to central planning than when the country was part of the Soviet Union.
C)The standard of living in Russia is higher than that of the United States.
D)None of the statements are true.

Question 45

In a centrally planned economic system, who decides what and how much will be produced?

A)Consumers
B)Privately owned businesses
C)The government
D)The people, by referendum every five years
E)Consumers and producers together, guided by the market

Question 46

Which statement is true?

A)Our economic system leads to an equitable distribution of income.
B)One of the basic functions of our government is to transfer some income from the rich and the middle class to the poor.
C)The price mechanism and the definition of economics are incompatible.
D)None of the statements are true.

Question 47

Which statement is true?

A)Private business firms are illegal in China.
B)In China today, there is strict adherence to the communist credo, "From each according to his ability, to each according to his needs."
C)Major economic reforms in China in the late 1970s and early 1980s created a much more market oriented economy than a centrally planned one.
D)None of the statements are true.

Question 48

Which one of these is not a characteristic of capitalism?

A)Central planning
B)Private property
C)The price mechanism
D)Competition

Question 49

In the 1980s, ___________________ strictly adhered to the communist credo, "From each according to his ability, to each according to his needs".

A)China, but not the Soviet Union
B)The Soviet Union, but not China
C)Both China and the Soviet Union
D)Neither China nor the Soviet Union

Question 50

Mao Tse-tung was responsible for

A)both the Great Leap Forward and the Cultural Revolution.
B)neither the Great Leap Forward nor the Cultural Revolution.
C)the Great Leap Forward, but not the Cultural Revolution.
D)the Cultural Revolution, but not the Great Leap Forward.

Question 51

The Chinese economy was set back by

A)the Great Leap Forward, but not the Cultural Revolution.
B)the Cultural Revolution, but not the Great Leap Forward.
C)both the Cultural Revolution and the Great Leap Forward.
D)neither the Cultural Revolution nor the Great Leap Forward.

Question 52

If we were to examine the economic record of the former Soviet Union and China during the 1980s, we could reasonably conclude that

A)China was successful and the Soviet Union was not.
B)The Soviet Union was successful and China was not.
C)Both the Soviet Union and China were successful.
D)Neither China nor the Soviet Union were successful.

Question 53

What is a mixed economy?

A)An economy in which production and distribution is done by both a private sector and a public sector.
B)An economy that has a mixture of resources.
C)An economy run by representatives of different political parties.
D)An economy that produces a blend of various products rather than concentrating on a single product.

Question 54

The Chinese economy has embarked on a large-scale process of privatization since

A)1949.
B)The mid-1950s.
C)The mid-1960s.
D)The late 1970s.
E)The late 1980s.

Question 55

Karl Marx and Friedrich Engels said

A)"The theory of the Communists may be summed up in the single sentence: Abolition of private property."
B)"The vice of capitalism is that it stands for the unequal sharing of blessings; whereas the virtue of socialism is that it stands for the equal sharing of misery."
C)"It is not the employer who pays wages-he only handles the money.It is the product that pays wages."
D)"Capital is past savings accumulated for future production."

Question 56

Modern mixed economies

A)generally alter the outcome of market processes in a manner that is believed to be in the social interest.
B)attempt to redistribute income to make the distribution of income more equitable.
C)rely on the government as well as the market to effect the distribution of goods and services.
D)undertake all of the actions listed.

Question 57

About ______ percent of China's population lives in rural areas.

A)5
B)25
C)50
D)67

Question 58

Karl Marx and Friedrich Engels believed that after the capitalists were overthrown, eventually

A)the state would get stronger.
B)the state would wither away.
C)the capitalists would regain power.
D)a fascist state would emerge.

Question 59

Which statement is true about China?

A)It is a world-class industrial power.
B)It has not as yet achieved world-class industrial power, but it is heading in that direction.
C)It has just begun its industrial development.
D)It has virtually no industry, and has not yet embarked on a course of industrialization.

Question 60

Capitalism is an economic system in which the ownership of resources is mostly

A)private.
B)collective.
C)by government.
D)All of the choices are true.
E)None of the choices are true.

Question 61

Of the 39 million Americans living in poverty, _______________ are children.

A)one-quarter
B)10 percent
C)less than half
D)more than half

Question 62

Market failure means that

A)the law of supply and demand has stopped functioning.
B)our resources are not allocated efficiently.
C)the stock market has crashed.
D)prices are no longer reliable indicators of how much things cost.

Question 63

The most glaring economic problem in the former Soviet Union was

A)a shortage of military goods
B)a surplus of military goods
C)a shortage of civilian goods
D)a surplus of civilian goods

Question 64

Which statement is most accurate?

A)Communism is completely dead as an economic system.
B)Communism is the wave of the future.
C)Although the United States is nominally a capitalist society, we have a basically communist economy system.
D)The American economy is guided almost entirely by the price mechanism.

Question 65

Statement I. Market failure rarely happens under capitalism. Statement II. One remedy for market failure is public goods and services.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 66

When our resources are NOT allocated efficiently, we have _______________.

A)answered the basic economic questions
B)a market failure
C)a government failure
D)market equity

Question 67

Which statement is true?

A)Externalities and public goods are basic classes of market failure.
B)Externalities, but not public goods, is a basic class of market failure.
C)Public goods, but not externalities, is a basic class of market failure.
D)Neither public goods nor externalities are basic classes of market failure.

Question 68

In the former Soviet Union most goods and services were produced by _____________; in the United States most goods and services are produced by ____________.

A)the government; private enterprise
B)the government; the government
C)private enterprise; the government
D)private enterprise; private enterprise

Question 69

Externalities consist of ___________________.

A)only external costs
B)only external benefits
C)both external costs and external benefits

Question 70

Characteristics of the "invisible hand" concept include all of the following, except

A)Simple markets.
B)Individuals and firms pursue their own self-interest without any central direction or regulation.
C)A complete lack of government involvement in the economy.
D)All of the choices are characteristics of the "invisible-hand."

Question 71

An example of a public good would be

A)a plane ride from Miami to Dallas.
B)flood control protection from the Tennessee Valley Authority (TVA).
C)a commuter's trip to work by car from Berkeley to Chicago.
D)a ride on a Greyhound bus from Phoenix to Los Angeles.

Question 72

Statement I. There are several public goods that were once privately produced. Statement II. National defense is a public good.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 73

Which does not fit with the others?

A)Competition
B)Government planning and regulation
C)The invisible hand
D)The price mechanism

Question 74

Statement I. Pollution is an example of market failure. Statement II. Externalities can be costs or benefits.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 75

Externalities may be internalized by

A)government-imposed taxes and subsidies.
B)regulation.
C)legal rules and procedures.
D)bargaining and negotiation.
E)All of the choices are correct.

Question 76

The person responsible for beginning to privatize China's economy since the mid-1970s is

A)Deng Xiaoping.
B)Mao Tse-tung.
C)Sun Yat-sen.
D)Chiang Kai-shek.

Question 77

Statement I. Pollution is an example of a market failure. Statement II. Mowing your lawn provides an external benefit.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question 78

How many households receive their incomes mainly from the business sector?

A)300 million
B)117 million
C)50 million
D)39 million

Question 79

The U.S. distribution system is

A)identical to that of the former Soviet Union.
B)based on a pure socialist economy.
C)determined by a modified version of one dollar, one vote.
D)similar to the fascist 1930's Germany.

Question 80

Statement I. Public goods tend to be indivisible. Statement II. There is often no way to exclude anyone from consuming a public good if she or he did not pay for it.

A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.