1. Which of the following is NOT one of the Three Fundamental Questions?
a. How are products to be produced?
b. Who is to decide what and how much to produce?
c. Who is to receive the output of the system?
d. What goods and services should be produced by government?
2. Capitalism is characterized by:
a. extensive government constraints on individual behavior.
b. private ownership of the means of production.
c. government control of all production decisions.
d. government rationing of all goods and services.
3. The term "consumer sovereignty" means that:
a. consumers are controlled by the actions of the marketplace.
b. what is produced is ultimately determined by what consumers buy.
c. there are no limits on what consumers may buy under capitalism.
d. businesses work with consumer satisfaction as their primary goal.
4. The introduction of "new" Coca-Cola and the reintroduction of the old "Classic Coke" is an example of:
a. an increase in demand.
b. consumer sovereignty.
c. technological advances.
d. economic profit.
5. "How is the product to be distributed among people when commodities and services are available?" In a market economy, this problem is resolved primarily in the:
a. public sector through the mechanism of central planning.
b. business sector through the mechanism of advertising.
c. private sector through the earning and spending of income.
d. money market through borrowing and saving by households and businesses.
6. When economists describe "a market," they mean:
a. a place where stocks and bonds are traded.
b. information networks that allow individuals to keep in touch with each other.
c. a hypothetical place where the production of goods and services takes place.
d. a mechanism which coordinates actions of consumers and producers to establish equilibrium prices and quantities.
7. Which of the following is NOT a determinant of demand?
a. income
b. the cost of inputs in production
c. the prices of related goods
d. future price expectations