• Use the Dropbox to submit your answer. Underline or highlight your answer.
1. Risk is a problem faced:
A. only in market systems.
B. only in command systems.
C. in both market systems and command systems.
D. in neither market systems nor command systems, only in laissez-faire capitalism.
2. Which of the following best illustrates the circular flow model in action?
A. A person who goes to work and builds cars, and uses the income she receives to buy food at the grocery store.
B. A person who buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier, and uses the rest to take her family out to dinner.
C. Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers.
D. All of these answers illustrate the workings of the circular flow model.
3. “Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits.” This quotation best identifies the:
A. incentive problem under central planning.
B. coordination problem under central planning.
C. self-sufficiency dilemma under communism.
D. resource over commitment problem under communism.
4. Two major virtues of the market system are that it:
A. allocates resources efficiently and allows economic freedom.
B. results in an equitable personal distribution of income and always maintains full employment.
C. results in price level stability and a fair personal distribution of income.
D. eliminates discrimination and minimizes environmental pollution.
5. The market system’s answer to the fundamental question “How will the system promote progress?” is essentially:
A. “Through government-funded research programs.”
B. “Through redistribution of income to promote greater equality.”
C. “Through training and retraining programs.”
D. “Through the profit potential that encourages development of new technology.”
Explain the importance of the following economic concepts in today’s society.
• You may use recent statistics and graphs to supplement your answer.
• Use the Dropbox to submit your answer.
1. Laissez – Faire Capitalism
2. Command System
3. Self interest and Invisible Hand
4. Active, but Limited, Government
5. How market economies respond to five fundamental questions
6. The Circular Flow Model
7. Businesses main categories
8. Index of Economic Freedom
9. Advantages of Market System
10. The Demise of Command System
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