Question: Which of the following is a distinguishing feature of laissez-faire capitalism?

Answer: Minimal government intervention.

Question: Examples of command economies are:

Answer: Cuba and North Korea.

Question: Economic systems differ according to which two main characteristics?

Answer: Who owns the factors of production and the methods used to coordinate economic activity.

Question: A fundamental difference between the command system and laissez-faire capitalism is that, in command systems

Answer: the division of output is decided by central planning rather than by individuals operating freely through markets.

Question: Which of the following is a fundamental characteristic of the market system?

Answer: Property rights.

Question: Copyrights and trademarks are examples of:

Answer: Property rights.

Question: The division of labor means that:

Answer: workers specialize in various production tasks.

Question: Specialization in production is important primarily because it:

Answer: results in greater total output.

Question: The presence of market failures implies that:

Answer: there is an active role for government, even in a market system.

Question: Which of the following is one of the Five Fundamental Questions?

Answer: What goods and services will be produced?

Question: From society's point of view, the economic function of profits and losses is to:

Answer: reallocate resources from less desired to more desired uses.

Question: The regulatory mechanism of the market system is:

Answer: competition.

Question: Economic profits and losses

Answer: are essential to the reallocation of resources from less desired to more desired goods.

Question: If competitive industry Y is incurring substantial losses, output will:

Answer: contract as resources move away from industry Y.

Question: In a market economy, the distribution of output will be determined primarily by:

Answer: the quantities and prices of the resources that households supply.

Question: The most efficient combination of resources in producing a given output is the combination that:

Answer: minimize the cost per unit of output.

Question: Firms are motivated to minimize production costs because:

Answer: competitive pressures in the market will drive out higher-cost producers.

Question: The market system's answer to the fundamental question "What will be produced?" is essentially:

Answer: "Goods and services that are profitable."

Question: The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially:

Answer: "In ways that minimize the cost per unit of output."

Question: The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:

Answer: "Those willing and able to pay for them."