1.
Competition means that:
A.
sellers can manipulate market price by causing product scarcities.
B.
there are large numbers of independently-acting buyers and sellers in each market.
C.
a product can be purchased at a number of different prices.
D.
there is more than one seller in a market.
2.
Which of the following is unique to capitalist ideology?
A.
the extensive use of capital goods
B.
private ownership of property resources
C.
specialization
D.
the use of money
3.
Well-defined property rights are important because they:
A.
encourage investment and growth.
B.
are conducive to the writing of books and music.
C.
facilitate exchange.
D.
do all of the above.
4.
Which of the following is an example of a capital good.
A.
a Federal government bond.
B.
a share of General Motors stock
C.
a bag of potatoe chips
D.
a Boeing 757 airplane
5.
The competitive market system:
A.
encourages innovation because government provides tax breaks and subsidies to those who develop new products or new productive techniques.
B.
discourages innovation because it is difficult to acquire additional capital in the form of new machinery and equipment.
C.
discourages innovation because firms want to get all the profits possible from existing machinery and equipment.
D.
encourages innovation because successful innovators are rewarded with economic profits.
6.
In a competitive market economy firms will select the least-cost production technique because:
A.
such choices will result in the full employment of available resources.
B.
to do so will maximize firm profits.
C.
this will prevent new firms from entering the industry.
D.
"dollar voting" by consumers mandates such a choice.
7.
"Consumer sovereignty" refers to the:
A.
fact that resource prices are higher than product prices in capitalistic economies.
B.
idea that the pursuit of self-interest is in the public interest.
C.
idea that the decisions of producers and resource suppliers with respect to the kinds and amounts of goods produced must be appropriate to consumer demands.
D.
fact that a Federal agency exists to protect consumers from harmful and defective products.
8.
Which of the following best describes the "invisible hand" concept?
A.
The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.
B.
The nonsubstitutability of resources creates a conflict between private and public interests and the need for government intervention.
C.
Mixed capitalism is the best system for overcoming the scarce resources-unlimited wants problem.
D.
Central direction by the government will improve resource allocation in a capitalistic economy.
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