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Economics Chapter 2 Assessment

True/False
Indicate whether the sentence or statement is true or false.
 

1. 

The three basic economic questions are what to produce, how to produce, and for whom to produce.
 

2. 

No pure economic systems really exist.
 

3. 

In a command economy, private ownership of property and individual decision-making are combined with government regulations.
 

4. 

In a market economy, the flow of resources, goods and services, and dollars is circular.
 

5. 

A traditional economy provides a wide choice of goods and services.
 

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

6. 

All economic systems
a.
produce the same goods.
b.
must answer the same three basic questions.
c.
have the same resources.
d.
distribute products through majority rule.
 

7. 

Almost all economic systems today are
a.
traditional economies.
c.
command economies.
b.
mixed economies.
d.
market economies.
 

8. 

Who owns the factors of production and makes economic decisions in a market economy?
a.
individuals
c.
economists
b.
government
d.
communities
 

9. 

Which of the following groups of people have a traditional economy?
a.
Australian Aborigines
c.
North Koreans
b.
medieval peasants
d.
Chinese factory workers
 

10. 

One advantage of a controlled economy is
a.
the incentive to work hard.
c.
the speed of rerouting resources.
b.
consumer choices.
d.
the opportunities for wealth.
 

11. 

Since the 1880s, the role of government in the United States has
a.
decreased.
c.
been eliminated.
b.
increased significantly.
d.
had no impact on the economy.
 

12. 

Which of the following describes a free enterprise system?
a.
Individuals are free to own and control the factors of production.
b.
Government owns and controls the factors of production.
c.
Businesses cannot make a profit.
d.
There are no legal restrictions on freedom of enterprise.
 

13. 

In a free enterprise system, who makes the decisions about what should be produced?
a.
sellers
c.
consumers
b.
entrepreneurs
d.
government
 

14. 

What motivates people to establish new businesses or expand existing ones?
a.
private property
c.
freedom of choice
b.
government regulations
d.
profit incentive
 

15. 

Competition forces businesses to
a.
keep prices low.
c.
lower the quality of their products.
b.
raise prices.
d.
raise the costs of production.
 

16. 

The goal of economic freedom is to
a.
allow the government to control the economy.
b.
limit competition.
c.
allow each member of society to make choices.
d.
prevent businesses from failing.
 

17. 

When the benefits of an economic action exceed the costs,
a.
economic efficiency increases.
b.
economic efficiency decreases.
c.
production of goods and services decreases.
d.
economic freedom decreases.
 

18. 

A law dealing with unemployment compensation helps provide
a.
economic growth.
c.
economic security.
b.
economic stability.
d.
economic equity.
 

19. 

Economic equity deals with the issue of
a.
profit.
c.
fairness.
b.
choices.
d.
specialization.
 

20. 

The goal of economic stability is to reduce extreme ups and downs in the
a.
minimum wage.
c.
factors of production.
b.
standard of living.
d.
nation's economy.
 

Completion
Complete each sentence or statement.
 

21. 

An economic system in which individuals own the factors of production and decide how to use them within legal limits is called a _________________________.
 

 

22. 

____________________ means the government lets people and businesses make their own economic decisions without interference.
 

 

23. 

Another term for free enterprise system is ____________________.
 

 

24. 

By protecting the rights of private property, the U.S. Constitution also gives individuals a ____________________ or desire to make money by producing and selling goods.
 

 

25. 

____________________ leads producers to use resources efficiently and keeps prices low for consumers.
 

 

26. 

Another name for a free enterprise system is ____________________.
 

 

27. 

Economic efficiency is the wise use of ____________________ so that costs do not exceed benefits.
 

 

28. 

The goal of ____________________ is to reduce extreme ups and downs in the standard of living.
 

 

29. 

Economic security provides protection against ____________________.
 

 

30. 

The goal of economic equity is ____________________.
 

 

Matching
 
 
Match each item with the correct statement below.
a.
economic system
b.
traditional economy
c.
command economy
d.
market
e.
mixed economy
 

31. 

freely chosen activity between buyers and sellers of goods and services
 

32. 

system in which the government controls the factors of production and makes all decisions about their use
 

33. 

way in which a nation uses its resources to satisfy its people's needs and wants
 

34. 

system combining characteristics of more than one type of economy
 

35. 

system in which economic decisions are based on customs that have been handed down from generation to generation
 
 
Match each item with the correct statement below.
a.
capitalism
b.
laissez-faire
c.
profit
d.
private property
e.
competition
 

36. 

money left over after all the costs of production have been paid
 

37. 

rivalry among producers or sellers of similar goods and services to win more business
 

38. 

economic system in which the government lets people do as they choose
 

39. 

economic system in which private individuals own factors of production
 

40. 

whatever is owned by individuals rather than by government
 
 
Match each item with the correct statement below.
a.
economic efficiency
b.
economic equity
c.
standard of living
d.
economic growth
e.
economic responsibility
 

41. 

material well-being of an individual, group, or nation measured by how well necessities and luxuries are satisfied
 

42. 

expansion of the economy to produce more goods, jobs, and wealth
 

43. 

wise use of available resources so that costs do not exceed benefits
 

44. 

obligation of individuals in a free enterprise system to function as productive members of society
 

45. 

the attempt to balance an economic policy so that everyone benefits fairly
 



 
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