ECONOMICS-CHAPTER 2 TEST –STUDY GUIDE MATCHING STANDARD OF LIVING FACTOR PAYMENTS PRIVATIZE FREE ENTERPRISE ECONOMIC SYSTEM CONTINUUM SELF-INTEREST INCENTIVE SAFETY NET COLLECTIVE COMMUNISM SOCIALISM LAISSEZ FAIRE TRANSITION COLLECTIVE TRADITIONAL ECONOMY PRODUCT MARKET AUTHORITARIAN MULTIPLE CHOICE What is the purpose of competition? What is the function of an economic system? What are the key economic questions? What does the process of specialization do for an economy? What is one of the most important advantages of a free market? Know the characteristics of a traditional economy, free market, centrally planned economy, mixed economy, market economy. Be able to define the following: 1) Product Market, 2) Factor Market Understand the principle of the invisible hand. Know and understand the principle of a safety net. Why do markets exist? Know the differences between socialism and communism.