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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. Protection refers to:
(a) safe production methods
(b) insurance on shipments
(c) insurance and benefits for workers
(d) tariffs and other trade restrictions

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

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

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

5. The only kind of capital:
(a) are human and physical capital
(b) is only human capital
(c) is only physical capital
(d) is only financial capital

Short Answer Questions

1. An unfavorable balance of payments situation meant:

2. The distribution of income is determined by all but the following:

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

4. What kind of international trade is best?

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

(see the answer key)

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