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Chapter 1, The Power of the Market

1. The economy functions on the basis of:
(a) voluntary cooperation
(b) orders
(c) command
(d) government direction

2. According to Friedman, the former Soviet economy was based on:
(a) command
(b) none of the above
(c) voluntary cooperation
(d) free markets

3. The command elements of every economy include things like:
(a) court orders
(b) forbidding the purchase and sales of heroin
(c) military conscription
(d) prices

4. Adam Smith says that voluntary exchange will not take place unless:
(a) the government can tax the transaction
(b) both parties benefit from it
(c) one party can profits
(d) it is commanded

5. The price system functions in such a way that each individual acting in his own best interests, makes everyone better off. This concept is known as the:
(a) command
(b) invisible hand
(c) voluntary nature
(d) visible hand

6. Adam Smith wrote:
(a) The Price System
(b) Economic Made Simple
(c) The Wealth of Nations
(d) Das Kapital

7. Which of the following is not a function of the price system:
(a) efficient use of resources
(b) government established prices
(c) distribution of income
(d) transmitting information

(read all 180 Multiple Choice Questions and Answers)

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