Deck 2: The Power of Markets and the Wealth of Nations

Question 1

Economic freedom and economic prosperity are

A)positively correlated.
B)negatively correlated
C)not correlated.
D)inconsistent with human rights.

Answer 1

positively correlated.

Question 2

Trade between countries is based on

A)absolute advantage only.
B)monopoly power.
C)comparative advantage.
D)none of these choices.

Answer 2

comparative advantage.

Question 3

A brand name is a type of

A)cost saving.
B)buyback contract.
C)monopoly power.
D)entry requirement for a competitive market.

Answer 3

monopoly power.

Question 4

In international trade the concept of 'relative opportunity cost' refers to

A)absolute advantage.
B)comparative advantage.
C)technical costs.
D)institutional advantage.

Question 5

Property rights

A)only need to be found in wealthy segments of the population.
B)need to be universal.
C)do not promote incentives.
D)do not promote efficiency

Question 6

Property rights need to be secure

A)to promote economic development.
B)to encourage environmentalism.
C)to promote an equal distribution of income.
D)all of these choices.

Question 7

The cost of a choice is

A)the price of the product selected.
B)the price of the product not selected.
C)the next best opportunity.
D)all of the opportunities given up.

Question 8

Buying a product in one market and selling it in another is called

A)competition.
B)arbitrage.
C)efficiency.
D)comparative advantage.

Question 9

Without contracts, what type of transactions would occur?

A)forward purchases.
B)lateral purchases.
C)spot transactions.
D)side bars.

Question 10

What incentive is created by a first-come first-serve allocation scheme?

A)To engage in rent-seeking.
B)To have the most income.
C)To be first.
D)To be elected.

Question 11

People trade because

A)they are able to take advantage of others.
B)government regulates the market.
C)the must do so.
D)they make themselves better off.

Question 12

Trade is promoted by

A)having a self-interested population.
B)proper incentives.
C)the presence of property rights.
D)all of these choices.

Question 13

Prior to 1840, most businesses were

A)family-owned.
B)corporate in structure.
C)vertically integrated.
D)collections of partnerships.

Question 14

Allocation schemes can be based on

A)prices.
B)randomness.
C)government decisions.
D)all of these choices.

Question 15

The fundamental economic problem faced by individuals is

A)scarcity.
B)comparative advantage.
C)fair allocations of goods and services.
D)randomness in the distribution of income.

Question 16

Data suggest that which of the following are necessary for high rates of economic growth?

A)private property rights.
B)free markets.
C)clear incentives.
D)all of these choices.

Question 17

All the costs of a transaction are referred to as

A)transfer costs.
B)transactions costs.
C)marketing expenditures.
D)accounting costs.

Question 18

What motivates the actions of entrepreneurs in markets?

A)profits.
B)cost savings.
C)revenue.
D)prestige.

Question 19

With economies of scale came

A)larger families.
B)simpler business forms.
C)the need for management structures beyond what a family could offer.
D)fewer economies of scope.

Question 20

Economists argue that which allocation scheme leads to the most efficiency?

A)market based.
B)government based.
C)random.
D)first-come, first-serve.

Question 21

The ownership of property is not related to economic development.

Question 22

Comparative advantage and relative opportunity costs are the same thing.

Question 23

Monopoly is represented by a single seller.

Question 24

Arbitrage creates profits but has no effect on prices.

Question 25

Clearly defined property rights promote the efficient use of property.

Question 26

First-come, first-serve allocation schemes promote efficiency.

Question 27

It is impossible to create a free market system that promotes economic efficiency.

Question 28

Trade between countries is only based on absolute advantage.

Question 29

Creative destruction is one of the negative effects of market competition.

Question 30

Opportunity cost is defined monetary terms.

Question 31

In Argentina, agricultural production is directly related to

A)government subsidies.
B)price controls.
C)import tariffs.
D)well-defined property rights..

Question 32

Agriculture in Argentina became more efficient when ____ were introduced.

A)subsidies.
B)property rights.
C)tariffs.
D)regulations