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Exercise (Economic systems) week10
1. Economic planning by central government agencies is primarily associated with
(A) command economies
(B) market economies
(C) mixed economies
(D) traditional economies
2. In market economies, the incentive that draws entrepreneurs into industry is
(A) government bonuses for meeting production quotas
(B) the opportunity to gain profit
(C) government assistance with making output and pricing decisions
(D) a guaranteed minimum income level
3. In a mixed economy, the economic decisions of what to produce, how to produce, and who will
receive products are made by
(A) the government
(B) consumers and firms
(C) firms, consumers, and the government
(D) banks and the government
4. Unlike the command economic system, the merits of the market system are
I.
economic efficiency
II.
effective central planning
III.
individual freedom of choice
IV.
incentives generate innovation
(A) I and IV only
(B) I and III only
(C) I, II, and IV only
(D) I, III, and IV only
5. The major problems faced by a pure command economy include all of the following EXCEPT
(A) limited consumer choice
(B) lack of entrepreneurial incentives
(C) a lack of central planning
(D) inefficient use of resources
6. All of the following are key features of the market system EXCEPT
(A) the interaction of supply and demand
(B) economic growth and progress
(C) the need for central economic planning
(D) the trade-off between limited incomes and unlimited wants
7. In a command economic system, the answers to the fundamental economic questions are
determined by
(A) government, businesses, and consumers
(B) consumers, businesses, and government through their trade-offs
(C) government alone
(D) government and businesses
8. Which type of economic system communicates changes in consumer tastes through price and
profit signals?
(E) A command economy
(F) A market economy
(G) A traditional economy
(H) A directed economy
Explain the advantage and disadvantage of market economic system. (10)
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