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This quiz consists of 5 multiple choice and 5 short answer questions through Chapter 2, The Tyranny of Controls.

Multiple Choice Questions

1. International trade theory is based on:
(a) geography
(b) inflows and outflows
(c) the principle of absolute advantage
(d) the principle of comparative advantage

2. Which of the following is not one of Adam Smith's duties of government?
(a) correct for third party effects
(b) protection of members of society who are not responsible, such as children
(c) protect members from coercion
(d) administration of justice

3. Governments intervene in foreign currency markets:
(a) by increasing imports
(b) by buying and selling domenstic and foreign currency
(c) by refusing to release currency to the market
(d) by increasing exports

4. What kind of international trade is best?
(a) trade with restrictions
(b) free trade
(c) no trade
(d) partically free trade

5. Prices function to transmit information to all but:
(a) buyers
(b) manufacturerr
(c) sellers
(d) no one in particular

Short Answer Questions

1. Adam Smith says that voluntary exchange will not take place unless:

2. The command elements of every economy include things like:

3. The higher price of pencils results in all but the following:

4. What interferes with the transmittal of information by prices?

5. According to Friedman, the former Soviet economy was based on:

(see the answer key)

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