Economics Chapter 3 Test

Name: __________________________
Class: ______________
Economics Chapter 3 Test
What is a free enterprise system?
a. Pure market system
b. A market system based on central planning
c. Capitalist market
d. Public ownership of resources
What “lies at the heart” of the free enterprise system?
a. Restricted trading
b. Free trade and private property rights
c. Government involvement
d. Communism
Which of the following is NOT an element necessary for free enterprise?
a. Free contract
b. Open legality
c. Legal equality
d. Open opportunity
What motivates people to start a business in a free enterprise system?
a. Competition
b. Profit motive
c. Capitalism
d. Free trade
What is legal equality?
a. Everyone has different rights in business
b. Everyone has similar rights in business
c. Everyone has the same rights in business
d. No one is subject to regulations in business
What is free contract?
a. People are able to enter into whatever legal agreement they choose
b. People are required to enter into a legal agreement of their choosing
c. People are required to enter into a predetermined legal agreement
d. People cannot enter into any legal agreements
How does profit motive motivate people to use resources efficiently?
a. To keep staff
b. To make a profit
c. To serve the public
d. To risk shutting down
A person choosing to start a business in a free enterprise system is an example of them taking
advantage of what?
a. Free market
b. Open Opportunity
c. Capitalism
d. Open Entrepreneurship
Name: __________________________
Class: ______________
9. Where is the government located in the circular flow model?
a. At the top
b. On the bottom
c. In the middle
d. Replaces businesses
10. Why are private property rights important?
a. They allow people to steal property
b. They allow people to take over the world
c. They allow people to make transactions with their property
d. They act as a safety net when financial hardships fall upon someone
11. What does it mean to be a free rider?
a. To hitchhike
b. To steal other’s money
c. To take advantage of something you didn’t pay for
d. To take advantage of something you did pay for
12. What role does the government play in the market?
a. It only places regulations
b. It acts as a consumer only
c. It acts as both a producer and consumer, while also placing regulations
d. It acts as a producer only while also placing regulations
13. What is a modified free enterprise market system?
a. A system with no government involvement
b. A system ruled by the government
c. A system with some government regulations and provisions
d. A system with government participation in the markets only.
14. What is a safety net?
a. The government giving all its money to needing citizens
b. Something only allowed to certain people
c. Something protecting from economic hardships
d. Something that does not offer any benefit to the people at all
15. Why is government involvement important in the market?
a. It allows people to do what they want
b. It prevents unfair practices
c. It overrules the decisions of consumers
d. It controls businesses in favor of the consumer
16. What does it mean to “vote with your wallet”?
a. You are using a ballot in your wallet to cast a vote
b. Your money is used to sway consumerism in your favor
c. Your money is used to pay supermarket employees
d. Your money is used to provide businesses with voting power
17. What does it mean to “vote” in the marketplace?
a. You are casting your vote to a political candidate
b. You are voting for the president through the marketplace
c. You are buying products
d. You are hoarding your money
Name: __________________________
Class: ______________
18. What does a vote decide in the marketplace?
a. What is should be produced
b. What should not be produced
c. What is the best product in the world
d. Why producers should produce a product
19. Assuming the government does participate in the market, how does it do so?
a. It makes purchases only
b. It only receives money for what its goods and services
c. It is both a consumer and producer
d. It is a monopoly and takes money from all businesses
20. What is a market failure?
a. When the stock market crashes
b. When individuals refuse to pay for goods and services
c. When individuals benefit from or pay the costs of something, they weren’t involved in
d. When the government provides everything for society, and no one has an incentive to work
21. If someone transfers money to their son, even though their son has nothing to offer in return, this
is an example of:
a. Market Failure
b. Public transfer payments
c. Transfer payments
d. An externality
22. Motor vehicles pollute the air, resulting in _______ for others.
a. Positive externality
b. Negative externality
c. Externality
d. Market failure
23. If someone complains about a pothole and it is fixed, everyone driving that road would benefit.
This is an example of:
a. Externality
b. Negative externality
c. Market failure
d. Positive externality
24. What is the reason the government would have to pay for street lights?
a. Poor economy
b. Externalities
c. Free riders
d. Market failure
25. Public transit, sewer systems, and highways are all examples of
a. Public goods
b. Infrastructure
c. Necessities
d. Societal functionality
Name: __________________________
Class: ______________
26. What is a public good?
a. Something offered at the supermarket
b. Something provided by some level of government
c. Something provided by individuals
d. Something that is provided by the nation as a whole
27. Who are public goods consumed by?
a. The government
b. The public as a whole
c. Dog owners
d. Prisoners
28. If the government offers funding to cover part of the costs of a state park, this would be
considered a(n)
a. Loan
b. Grant
c. Subsidy
d. Temporary adjustment
29. How does the government receive payment for its goods and services?
a. It steals money
b. It borrows money
c. It takes taxes
d. It requests money from people
30. If someone watches a firework show from outside the fence so they don’t have to pay admission,
they are a(n):
a. Free rider
b. Externality
c. Thief
d. Innocent civilian watching a free firework show