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

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

3. Economic freedom refers to all but which of the following:
(a) ability to decide what goods to purchase
(b) forced savings
(c) ability to choose how much to spend
(d) ability to select what investments to make

4. The Principle of Comparative Advantage states that a nation should specialize in:
(a) has the most of
(b) the production of goods in which it is relatively more efficient than the other nation
(c) all goods
(d) can get the highest price for

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

Short Answer Questions

1. Protection refers to:

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

3. Free trade takes place when:

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

5. The national security argument for protection states that:

(see the answer key)

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