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What is one of the most important advantages of a free market?

It encourages growth

Which of the following is a critical rule for determining whether something is a public good?

The total benefits to society are greater than the total cost.

What is a factory building an example of?

physical capital

What is the purpose of competition?

to act as a regulating force in the marketplace

The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. This kind of decision is a

guns or butter issue

Why are all goods and services scarce?

All resources are scarce.

What is one benefit provided by Social Security?

retirement income for the elderly

Which of the following countries is the most extreme example of a centrally planned economy?

North Korea

Which one of the following relies on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it?

a traditional economy

Which of the following is NOT a key economic question?

How should it be ensured that goods and services are paid for?

Which of the following is NOT characteristic of a centrally planned economy?

Each collective or factory sets its own goals.

What incentive motivates a manufacturer to sell a product?

making profits on sales

Which word BEST completes the following sentence? Improvements in ____ allow an economy to produce more output from the same or a smaller quantity of inputs.


In what kind of an economy does the government make all the decisions?

centrally planned

What is the most effective way for consumers to make their desires known to businesses?

by the purchases they make

The purpose of the free enterprise system is to

give consumers freedom to make economic choices.

China, like many other nations, is undergoing a period of transition in which many of its state firms are being privatized. Which of the following statements BEST describes the change in China's mixed economy system?

The economy is moving away from central planning toward a market-based system.

What is the function of an economic system?

to produce and distribute goods and services

What effect does new technology usually have on an economy?

It makes the economy stronger and more efficient.

What is an important advantage of a free market?

It offers a wide variety of goods and services.

Which of the following is NOT an example of a public good?

shopping mall

A country's production possibilities increase because the available workers become more skilled at using a computer. This is an example of growth caused by


Which of the following was a free market philosopher?

Adam Smith

Any resources that are made by humans and used to create other goods and services are called


According to the "guns and butter" example, if a country decides to spend more on military goods, which of the following will happen?

The country will have less money to devote to consumer goods.

What is the opportunity cost of a decision?

the most desirable alternative given up for the decision

Why does even a free market economy need some government intervention?

to provide for things that the marketplace does not address

Centrally planned economies can work effectively toward explicitly stated goals, but which of the following is one disadvantage of such a system?

Its performance almost always falls short of its ideals.

Which of the following makes someone an entrepreneur?

running a business that hires people to install sprinkler systems in lawns

By the end of the summer, Jason had saved enough money for college from his job as a waiter. He even had some money left over. Although he wanted both, he decided to buy a DVD player rather than a digital camera. Which of the following is the opportunity cost in this scenario?

the digital camera

The purpose of a production possibilities graph is to

show alternative ways to use an economy's resources.

The opportunity cost of a decision can be examined by using a

production possibilities graph

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