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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. A market failure occurs when:
(a) the production of a good is discontinued
(b) a producer goes bankrupt
(c) a producer finds there is no demand for his good
(d) an action or transaction affects third parties

2. Trade restrictions create:
(a) increase levels of trade
(b) friction between nations
(c) a good political situation
(d) a more competitive environment

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

4. The higher price of pencils results in all but the following:
(a) better worker condiciton for pencil prolduction workers
(b) higher wages for pencil production workers
(c) fewer pencils
(d) the firing of more workers to produce pencils

5. An exchange rate is the:
(a) bill of lading
(b) the way trade barriers are established
(c) price of one currency in terms of another currency
(d) interest rate in the foreign country

Short Answer Questions

1. Interested sophistry refers to:

2. Government subsidies to industry are viewed as:

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

4. A change in prices affects all but the following:

5. What is a good source of information on prices and markets?

(see the answer key)

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