Name: ______________________
Class: _________________
Date: _________
Economics Chapter 2 Section 2 Review (this is NOT an assignment)
Matching
a.
b.
c.
d.
____
communism
authoritarian
socialism
centrally planned economy
e.
f.
g.
h.
command economy
economic equity
traditional economy
capitalism
1. a major goal of socialist economies
Completion
Complete each statement.
2. An arrangement that allows buyers and sellers to exchange things is a(n) _______.
3. The arena of exchange where firms purchase factors of production is called the _______.
4. An individual’s own personal gain is _______.
5. The hope of reward that encourages a person to behave in a certain way is a(n) _______.
6. The fact that consumers have the power to decide what gets produced is called _______.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
7. Why do people need to buy and sell products or services?
a. People need to buy and sell products to make a profit.
b. We need to maintain a competitive society.
c. No one is self-sufficient.
d. People need to provide the market with goods and services.
____
8. What does the process of specialization do for an economy?
a. It eliminates unemployment.
b. It makes production more efficient.
c. It fosters competition.
d. It makes labor easier to control.
____
9. Who owns the factors of production?
a. individuals
b. households
c. firms
d. the market
1
ID: A
Name: ______________________
ID: A
____ 10. On which arrow(s) would weekly grocery shopping fall?
a. a and b
b. a
c. c
d. a and d
____ 11. Which of the following best describes the physical flow from households to firms shown in the diagram ?
a. interest and profits
b. labor and land
c. goods and services
d. wages and salaries
____ 12. What is the product market?
a. the market in which income is received for supplying land, labor, or capital
b. the market in which governments collect taxes from firms and consumers
c. the market in which firms purchase the factors of production from households
d. the market in which households purchase the goods and services that firms produce
____ 13. How will consumers react to the incentive of a higher price on a good or service?
a. The negative incentive will cause consumers to purchase less of the good or service.
b. The positive incentive will cause consumers to purchase less of the good or service.
c. The negative incentive will cause consumers to purchase more of the good or service.
d. The positive incentive will cause consumers to purchase more of the good or service.
2
Name: ______________________
ID: A
____ 14. What “invisible hand” regulates the free market economy?
a. incentive and efficiency
b. specialization
c. competition between firms
d. competition and self-interest
____ 15. Why are free market economies able to attain economic growth?
a. Consumers can purchase all the goods they need, which causes firms to produce more.
b. Competition encourages innovation, which causes growth.
c. Everyone is acting in their own self-interest, which motivates market growth.
d. Firms keep producing incentives to encourage households to purchase more goods.
____ 16. Which of the following is the main incentive for a manufacturer to sell a product?
a. making profits on sales
b. putting others out of business
c. pleasing the consumer
d. helping the economy grow
____ 17. What is one of the most important advantages of a free market?
a. It distributes goods equally.
b. It protects the less fortunate.
c. It is easy to regulate.
d. It encourages growth.
____ 18. What does the expression “the customer is king” mean in a free market economy?
a. In a service economy, the customer is always right.
b. Customers have the power to decide what gets produced.
c. People with the most money are treated like royalty.
d. Producers of goods are also customers.
Short Answer
Critical Thinking and Writing
Directions: Use complete sentences to answer the following questions.
19. Why do markets exist?
3
ID: A
Economics Chapter 2 Section 2 Review (this is NOT an assignment)
Answer Section
MATCHING
1. ANS: F
PTS: 2
DIF: L3
OBJ: 2.3.2 Distinguish between socialism and communism.
TOP: Economic Systems | Economic Equity
REF: A.34
STA: F.3
COMPLETION
2. ANS: market
PTS: 2
DIF: L3
REF: A.29
STA: F.5
TOP: Economic Systems | Markets
3. ANS: factor market
OBJ: 2.2.1 Explain why markets exist.
PTS:
OBJ:
TOP:
4. ANS:
2
DIF: L3
REF: A.31
2.2.2 Analyze a circular flow model of a free market economy.
Economic Systems | Factor Market
self-interest
PTS:
OBJ:
TOP:
5. ANS:
2
DIF: L3
REF: A.33
2.2.2 Analyze a circular flow model of a free market economy.
Economic Systems | Self-interest
incentive
PTS:
OBJ:
TOP:
6. ANS:
2
DIF: L3
REF: A.33
2.2.2 Analyze a circular flow model of a free market economy.
Economic Systems | Incentives
consumer sovereignty
PTS: 2
DIF: L3
REF: A.34
OBJ: 2.2.4 Identify the advantages of a free market economy.
TOP: Economic Systems | Consumer Sovereignty
MULTIPLE CHOICE
7. ANS: C
No one can produce all the goods and services to meet all of his or her needs and wants.
PTS: 3
STA: F.5
DIF: L3
REF: A.29
TOP: Economic Systems | Markets
1
OBJ: 2.2.1 Explain why markets exist.
ID: A
8. ANS: B
Specialization leads to efficient use of land, capital, and labor by concentrating productive efforts on a
limited number of activities.
PTS: 3
DIF: L3
REF: A.30
OBJ: 2.2.1 Explain why markets exist.
STA: F.5
TOP: Economic Systems | Specialization
9. ANS: B
Households own the factors of production.
PTS: 3
DIF: L3
REF: A.31
OBJ: 2.2.1 Explain why markets exist.
STA: F.5
TOP: Economic Systems | Factors of Production
10. ANS: A
Households pay firms for goods; firms supply households.
PTS: 5
DIF: L4
REF: A.31
OBJ: 2.2.2 Analyze a circular flow model of a free market economy.
TOP: Economic Systems | Free Market Economy
11. ANS: B
In a free market economy, firms pay workers for labor and may buy or rent land.
PTS: 5
DIF: L4
REF: A.31
OBJ: 2.2.2 Analyze a circular flow model of a free market economy.
TOP: Economic Systems | Free Market Economy
12. ANS: D
The product market is the arena of exchange in which households buy goods and services from firms.
PTS: 3
DIF: L3
REF: A.31
OBJ: 2.2.2 Analyze a circular flow model of a free market economy.
TOP: Economic Systems | Product Markets
13. ANS: A
Higher prices are a negative incentive that causes consumers to purchase less of a good or service.
PTS: 3
DIF: L3
REF: A.33
OBJ: 2.2.2 Analyze a circular flow model of a free market economy.
TOP: Economic Systems | Incentives
14. ANS: D
Competition and self-interest work together to regulate the marketplace.
PTS: 3
DIF: L3
REF: A.33
OBJ: 2.2.3 Describe the self-regulating nature of the marketplace.
NAT: 7.3
STA: F.5
TOP: Economic Systems | Invisible Hand
15. ANS: B
Competition encourages innovation, which helps economies grow.
PTS: 3
DIF: L3
REF: A.33
OBJ: 2.2.4 Identify the advantages of a free market economy.
TOP: Economic Systems | Free Market
2
ID: A
16. ANS: A
The manufacturer has the incentive to sell more to make profits.
PTS: 3
DIF: L3
REF: A.33
OBJ: 2.2.3 Describe the self-regulating nature of the marketplace.
NAT: 7.3
STA: F.5
TOP: Economic Systems | Incentives
17. ANS: D
Because the competition fostered by a free market encourages innovation, free market economies
encourage growth.
PTS: 3
DIF: L3
REF: A.34
OBJ: 2.2.4 Identify the advantages of a free market economy.
TOP: Economic Systems | Free Market Economy
18. ANS: B
Free market economies give customers a choice, and producers produce what customers choose to buy.
PTS: 3
DIF: L3
REF: A.34
OBJ: 2.2.4 Identify the advantages of a free market economy.
TOP: Economic Systems | Free Market Economies
SHORT ANSWER
19. ANS:
Possible answer: People cannot produce everything they need by themselves. Markets allow people to
buy what they need to consume and sell the specialized goods and services they produce.
PTS: 5
STA: F.5
DIF: L3
REF: A.29
OBJ: 2.2.1 Explain why markets exist.
TOP: Economic Systems | Why Markets Exist
3