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1. In any economic system, scarce resources have to be allocated among competing uses. Market economies harness the
forces of
a.
government to allocate scarce resources.
b.
supply and demand to allocate scarce resources.
c.
credit cards to allocate scarce resources.
d.
nature to allocate scarce resources.
2. The signals that guide the allocation of resources in a market economy are
a.
surpluses and shortages.
b.
quantities.
c.
government policies.
d.
prices.
3. Who gets scarce resources in a market economy?
a.
the government
b.
whoever the government decides gets them
c.
whoever wants them
d.
whoever is willing and able to pay the price
4. There is no shortage of scarce resources in a market economy because
a.
the government makes shortages illegal.
b.
resources are abundant in market economies.
c.
prices adjust to eliminate shortages.
d.
quantity supplied is always greater than quantity demanded in market economies.
5. In a market economy, who or what determines who produces each good and how much is produced?
a.
the government
b.
lawyers
c.
lotteries
d.
prices
6. Which of these statements does not apply to market economies?
a.
Prices prevent decentralized decision making from degenerating into chaos.
b.
Prices coordinate the actions of millions of people with varying abilities and desires.
c.
Prices ensure that anyone who wants a product can get it.
d.
Prices ensure that what needs to get done does in fact get done.
7. Suppose the United States had a short-term shortage of farmers. Which mechanisms would adjust to remove the
shortage?
a.
The government would provide tax incentives to encourage people to become farmers.
b.
The government would subsidize the production of food.
c.
The prices of food and the wages of farmers would adjust.
d.
There are no mechanisms to remove the shortage.
8. Adam Smith suggested that an invisible had guides market economies. In this analogy, what is the baton that the
invisible hand uses to conduct the economic orchestra?
a.
the government
b.
prices
c.
subsidies
d.
the Federal Reserve
