CHAPTER 2 REVIEW
NAME ___________________________ HOUR _______
KEY TERMS
Factor payments
safety net
traditional economy
market economy
Economic system
profit
competition
incentive
Self-interest
specialization
authoritarian
socialism
Collective
laissez faire
free enterprise
privatize
1.___________________________ doctrine that government generally should not intervene in the marketplace
2.___________________________ economic system that has minimal government intervention in business
3.___________________________ individuals purchase state run firms and then compete with others in marketplace
4.___________________________requiring strict obedience to the authority in a country, often to a dictator
5.__________________________ large Soviet firm leased by the state to groups of peasant farmers
6.__________________________ philosophy that says democratic means should be used to evenly distribute $$ to all
7.__________________________ financial gain in a transaction
8.__________________________ expectation that encourages people to behave in a certain way
9.__________________________ concentration of individuals and firms on a limited number of activities
10._________________________ method used by society to produce and distribute goods and services
11._________________________ economy in which economic decisions are based on exchange or trade
12._________________________ system to protect people experiencing difficulties in an economy
13._________________________ economy that relies on habit, custom, or ritual to answer key economic questions
MULTIPLE CHOICE
14._______ To improve its standard of living, a nation’s economy must
a. remain stable
b. grow through innovation
c. reach economic equity
d. allow govt to make decisions
15. _______ Each society determines who will consume what is produced based on
a. its unique combination of social values and goals
b. the amount of factor payments
c. its needs and wants
d. economic equity
16._______ Who owns the factors of production?
a. individuals
b. households
c. firms
d. the market itself
17._______ What “invisible hand” regulates the free market economy?
a. incentives and efficiency
b. specialization
c. competition between firms d. competition & self-interest
18._______Why are free market economies able to attain economic growth?
a. consumers can purchase all the goods they need which causes firms to produce more
b. competition encourages innovation, which causes growth
c. everyone is acting in their own self-interest, which motivates market growth
d. firms keep producing more incentives to encourage households to purchase more goods
19._______ Which of the following is NOT an advantage of a free market economy?
a. economic efficiency
b. economic freedom
c. economic equity
d. economic growth
20._______Who decided what would be produced on the former collectives?
a. the farmers themselves
b. the military
c. the government
d. the consumers
21._______ Why might Soviet economic planners have favored heavy industry over the makers of consumer goods?
a. products of heavy industry brought in more money
c. consumer goods are not good economic investments
b. more people were trained to work in heavy industry
d. products of heavy industry provide materials for others
22._______ Which of the following is NOT a disadvantage of a centrally planned economy?
a. it usually cannot meet consumers’ needs and wants
b. it tries to meet explicitly stated goals
c. it does not reward innovation
d. it sacrifices individual freedoms
23._______Government intervention in a modern economy is useful because
a. needs and wants are always met by the marketplace
c. marketplace provides all of its own laws
b. marketplace has incentives to create public works
d. governments are more able to meet some needs and wants fairly
24._______ In most mixed economies, the government does NOT
a. purchase land, labor and capital from households in the factor market
c. own all the property and confiscate all economic output
b. purchase goods and services
d. redistribute wealth through taxes & other means
25._______ The United States government intervenes to
a. provide competition for private firms
b. impose barriers on foreign trade
c. keep order, provide vital services, and promote general welfare
d. restrict the banking industry
26._______ Amber has received a job offer that pays $28500 per year. Her bi-weekly gross pay check will be
a. $2375
b. $1057-$1058
c. $1187-1188
d. $2000
27________If Tony is paid per lawn mowed, and he mows 15 lawns in a week at $25 per week, he will earn
a. $425
b. $325
c. $375
d. $250
28._______ Suzette is paid $50 per pedicure and $35 per manicure. Last week she did 8 pedicures and 12 manicures.
a. she earned $1000
b. she earned $700
c. she earned $820
d. she earned $880