Question 1

Which statement is true?

Accepted Answer

According to the statement, "In the United States most of our production is geared toward consumer goods." Therefore, choice A is true. Choice B is incorrect because the statement does not mention any specific percentage of national output being devoted to armaments. Choice C is also incorrect because the statement does not provide any comparison between the US and Japan in terms of the proportion of national output devoted to armaments. Choice D is false because the US does not have a central planning board consisting of top government, corporate, and union officials that decides what gets produced.

Question 2

Statement I.One of the economic roles of our government is to maintain our competitive system and ensure the relatively unfettered operation of the law of supply and demand.
Statement II.The Chinese economy has a very small private sector.

Accepted Answer

Statement I is true. One of the economic roles of the government is to maintain a competitive system and to ensure the relatively unfettered operation of the law of supply and demand. This is often achieved through policies that promote competition, such as antitrust laws and regulations that prevent monopolies from forming.

On the other hand, Statement II is false. The Chinese economy has a very large private sector, contrary to what the statement suggests. While the Chinese government does exert a great deal of control over the economy, there are many private enterprises operating in the country. In fact, China has been moving towards a more market-oriented economy over the past several decades, and the private sector has grown significantly as a result.

Question 3

Which one of the following is not a mixed economy?

Accepted Answer

All of the countries listed (United States, China, Japan, Sweden) have mixed economies, combining elements of both capitalism and socialism. This means they have a blend of private and public ownership of the means of production, and they utilize both market and planning strategies for economic decision-making.

Question 4

__________________ is an obvious example of government failure.

Accepted Answer

All three options listed are examples of government failure. The U.S. income tax system is notorious for its complexity and confusion, leading to errors and frustration among taxpayers. The numerous forms required by the government can be burdensome for businesses, potentially discouraging growth and investment. The Medicare drug prescription plan has been widely criticized for its complexity and lack of transparency, making it difficult for beneficiaries to understand and navigate.

Question 5

Cradle-to-grave security is most common in ___________ countries.

Accepted Answer

Cradle-to-grave security is a hallmark of socialist countries, where the government seeks to provide for the welfare and basic needs of all citizens from birth to death, through social welfare programs such as universal healthcare, free education, and retirement benefits. Communist and fascist countries may also provide some level of social welfare, but their primary focus is on controlling the economy or promoting nationalism, rather than ensuring the well-being of individuals. Capitalist countries generally rely on market forces rather than government intervention to address social welfare issues.

Question 6

Which is the most accurate statement?

Accepted Answer

The statement that "To allow the price mechanism to work we need many competing firms in each industry" is the most accurate because it reflects the basic principles of a competitive market system where firms compete with each other to attract customers by offering better products at lower prices, and the price mechanism (the interaction of supply and demand) determines the prices that prevail in the market. The other statements (A, C, and D) are incorrect or incomplete.

Question 7

An external benefit occurs when

Accepted Answer

An external benefit occurs when some of the benefits derived from the production or consumption of a good or service are enjoyed by a third party. This means that even though the third party did not directly pay for or participate in the transaction, they are still benefiting from it in some way. For example, a person who lives near a park may benefit from the park's existence even if they do not directly use it themselves.

Question 8

In the mid-1980s,in which communist country did the credo change from "From each according to his ability,to each according to his needs" to "More pay for more work,less pay for less work"?

Accepted Answer

This change in economic philosophy occurred in China under the leadership of Deng Xiaoping, who implemented market-oriented reforms and encouraged a shift towards a more capitalist system. The slogan "more pay for more work, less pay for less work" became a rallying cry for incentivizing productivity and efficiency in the workplace.

Question 9

In 2009,China's export surplus with the U.S.reached _______ million.

Accepted Answer

According to data from the U.S. Census Bureau, China's trade surplus with the U.S. in 2009 was $227 billion. None of the other answer choices are close to this figure.

Question 10

Which of the following economists believed that the factory owner,by paying his workers meager wages,was able to use this surplus to buy more capital goods?

Accepted Answer

Karl Marx is known for his theory of surplus value, which posits that capitalists (factory owners) generate profits by paying workers less than the value of what they produce, using this surplus to reinvest in more capital goods.

Question 11

Statement I.Under our economic system the most important decisions are made in the marketplace.
Statement II.Most economists would agree that the price system leads to a very efficient allocation of resources.

Accepted Answer

Statement I is generally true that the most important decisions are made in the marketplace. Consumers, through their purchasing decisions, send signals to producers regarding what goods and services they want, and producers respond accordingly. Statement II is also true that most economists would agree that the price system leads to an efficient allocation of resources. This is because prices serve as signals to producers regarding the scarcity or abundance of goods and services, which helps allocate resources efficiently.

Question 12

Today,__________ leads the world with more than 800 million cell phone users.

Accepted Answer

China has more than 800 million cell phone users, making it the country with the largest number of cell phone users in the world. The United States, Japan, and Canada have significantly fewer cell phone users compared to China.

Question 13

European communism collapsed during the years

Accepted Answer

The fall of the Berlin Wall in 1989 marked the beginning of the collapse of European communism, which continued through 1991. The Soviet Union dissolved in December of that year, bringing an end to communism as a dominating political ideology in Europe.

Question 14

Karl Marx believed the central figures in an industrial economy were the

Accepted Answer

Karl Marx believed that capitalists, or those who owned the means of production, were the central figures in an industrial economy. He saw them as exploiting the labor of the working class for their own profit, leading to what he called the inherent contradictions of capitalism.

Question 15

Karl Marx wrote largely about

Accepted Answer

Karl Marx primarily wrote about 19th century England, particularly in regards to the industrial revolution and the rise of capitalism. While he also wrote about other countries and eras, his focus on England during this time period is the most notable aspect of his work.

Question 16

Statement I.Adam Smith believed the federal government should play a larger role in the economy.
Statement II.Adam Smith said that a person pursuing his own interest "frequently promotes that of society more effectually than when he really intends to promote it."

Accepted Answer

Adam Smith was a champion of free market capitalism and believed in limited government intervention in the economy. Therefore, statement I is false. However, statement II is true and is a central idea in Smith's work "The Wealth of Nations", where he argues that individuals pursuing their own self-interest in a competitive market will ultimately lead to greater overall well-being and economic growth for society as a whole.

Question 17

Of the following countries which are recognized as socialist systems?

Accepted Answer

None of these countries have a fully socialist system. Sweden, Greece, and Canada have mixed economies with social welfare policies, but they are not socialist countries.

Question 18

___________________ a mixed economy.

Accepted Answer

The answer of ___________________ a mixed economy.
...

Question 19

The invisible hand is closely related to each of the following,except

Accepted Answer

The invisible hand concept is mainly related to market competition, supply and demand, and the price mechanism. It refers to how the market, without any central control, allocates resources efficiently based on the interactions of buyers and sellers. The concept has nothing to do with fairness or equity, which are values or principles that could be applied to measure the outcomes produced by the market processes. Therefore, option E is the best choice because it is not directly connected to the invisible hand concept.

Question 20

An external cost occurs when

Accepted Answer

An external cost occurs when the production or consumption of some good or service inflicts costs on a third party without compensation. This third party did not choose to incur the cost, nor did they receive any benefit from the activity that caused the cost. This is also known as a negative externality.

Quiz 3: The Mixed Economy