Economic Systems
40 questions· page 1 of 4
Which statement about a market economy is not correct?
Options
A Competition is promoted among firms which can increase productive efficiency.
B Immobility of the factors of production can lead to allocative inefficiency.
C Price always reflects all the costs and all the benefits associated with production.
D The entrepreneur is encouraged to innovate and take risks, motivated by profit.
What is an essential requirement for a market economy to be able to allocate its resources?
Options
A freedom of entry and exit
B private ownership of property
C many buyers and sellers
D perfect product knowledge
What is not a characteristic of a planned economy?
Options
A Consumers have limited influence on what is produced.
B Profit is the motive for increasing output.
C Resources are owned by the government.
D There is limited competition in the market.
Which change in the way resources are allocated in an economy is consistent with moving from a planned economy to a market economy?
Options
A A minimum price guarantee for apple producers is removed.
B A new government authority is established to monitor inefficiencies in apple production.
C The production of apples is subsidised to increase output.
D The sale of apples has a maximum price imposed.
A government wants to move its economy away from central planning towards a market economy.
Which policy would be consistent with this aim?
Options
A introduce tariffs on imported goods
B privatise the ownership of electricity generation
C provide free education for primary school pupils
D reduce prices of foods such as wheat and rice
What is not a characteristic of a mixed economy?
Options
A The government has no role in setting prices.
B The government manages taxation rights.
C The government prevents firms from earning excessive profits.
D The government provides services not provided by the private sector.
What is least likely to increase as a result of a transition from a planned economy to a free market economy?
Options
A prices of goods and services
B privately owned resources
C provision of merit goods
D structural unemployment
Eastern European nations have changed from planned to market economies.
Which policy was least likely to have been adopted?
Options
A allowing prices to fluctuate
B keeping established economic organisations
C privatising essential industries
D permitting changes in the money supply
What is the main characteristic of a planned economy?
Options
A All goods and services are produced by privately-owned firms.
B All goods and services are produced by state-owned firms.
C Privately-owned firms produce private goods and state-owned firms produce public goods.
D The price mechanism allocates scarce resources through the actions of buyers and sellers.
An economy is changing from a planned economy to a market economy.
Which action would be expected during this change?
Options
A the replacement of fiscal policy by monetary policy
B the replacement of multinational companies by national companies
C the replacement of nationalisation by privatisation
D the replacement of private property rights by common ownership