Ch 2 Economic Systems

Transitional economies are based primarily on custom and religion.

• true

• false

In command economies, the government owns all resources.

• true

• false

The PPF model illustrates the production of consumer goods but not capital goods.

• true

• false

According to the law of comparative advantage, the worker with higher opportunity cost of producing a particular output should specialize in that output.

• true

• false

Which question does an economy NOT have to answer?

• How will goods and services be produced?

• How many goods and services will be produced?

• What goods and services will be produced?

• For whom will goods and services be produced?

What does Adam Smith's metaphor of the "invisible hand" illustrate?

• promotes the general welfare and self-regulation

• promotes a strong central government

• promotes a traditional style economy

• promotes strong state government

A citizen complains that there is no way to enforce property rights, they most likely live in what type of economy?

• Mixed

• Command

• Market

• Traditional

Is it more common to lean more towards a market economy or a command economy when going through a transitional period?

• market

• command

What do the points outside of the PPF indicate?

• increase in opportunity cost

• goal for the combination of goods

• unattainable combinations of goods

• inefficient use of resources

Which of the following situations might cause an inward shift in the production possibilities frontier?

• A computer network shuts down due to a virus

• More people earn bachelors degrees

• A new machine that produces bread faster is invented

• they announce a new source of oil