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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. What term describes the deliberate setting of prices through an agreement by firms?
(a) Free market.
(b) Labor unions.
(c) Monopoly.
(d) Collusion.

2. What industry does Friedman use to explain his views on monopoly in labor?
(a) Coal.
(b) Manufacturing.
(c) Steel.
(d) Auto.

3. According to Friedman, what is one major cost of the extension of governmental welfare activities?
(a) Increased regulation of private organizations.
(b) Higher taxes with low results.
(c) Decline in private charitable activities.
(d) Lower productivity of labor.

4. What does Friedman advocate the abolition of in Chapter 10, The Distribution of Income?
(a) Trade unions.
(b) Flat-rate income tax.
(c) Welfare.
(d) Corporate income tax.

5. What has been more potent for progress than the visible hand for retrogression according to Friedman?
(a) Invisible hand.
(b) Transparent hand.
(c) None of the answers is correct.
(d) Hidden hand.

6. Friedman believes that the goddess of chance is ______.
(a) Dead.
(b) Blind.
(c) Skilled.
(d) Deaf.

7. What is one factor that Friedman believes has reduced inequality?
(a) Government intervention.
(b) Civil Rights laws.
(c) Educational opportunities.
(d) Advances in technology.

8. Another threat for Friedman to the preservation and expansion of freedom is:
(a) An internal threat of unfair political practices.
(b) An internal threat of labor unions.
(c) An internal threat of licensure requirements.
(d) An internal threat of government regulation.

9. What is one example Friedman uses to demonstrate his point on monopoly in industry?
(a) Steel vs. shipping industry.
(b) Automobile vs. wholesale industry.
(c) Entertainment vs. telecommunication industry.
(d) Textile vs. production industry.

10. What is one example of a government supported monopoly?
(a) The coal industry.
(b) The auto industry.
(c) The postal service.
(d) The sugar cane industry.

11. What one argument for OASI can be justified for Friedman?
(a) It serves as a magnification of society's social issues.
(b) It puts youth and the elderly on the same playing field.
(c) It helps low-income people more than high-income people.
(d) It helps high-income people more than low-income people.

12. What is the key issue for Friedman with annuities?
(a) Fulfilling the demand for annuities.
(b) Government issuance of annuities.
(c) Distributing the profits of annuities.
(d) Compulsory purchase of annuities.

13. Who said, "There is much ruin in a nation"?
(a) Adam Smith.
(b) Carl Menger.
(c) Milton Friedman.
(d) John Maynard Keynes.

14. Which type of monopoly does Friedman believe is least bad?
(a) Labor monopoly.
(b) Government monopoly.
(c) Private monopoly.
(d) Government regulation.

15. What does the Texas Railroad Commission enforce?
(a) Cattle in fields near railway lines.
(b) Output of oil wells.
(c) Number of trains on the rails.
(d) Transportation of goods by rail.

Short Answer Questions

1. What type of society does Friedman believe is least materialistic?

2. How many problems with monopolies does Friedman describe?

3. Forming a list of who engages in what is known as ______.

4. Friedman advocates ______ income of the poor.

5. Friedman hypothesizes that there has been a change in discrimination along with the rise of capitalism because ______.

(see the answer keys)

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