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

2. Government interferes with the price system by:
(a) action fixing
(b) ignoring it
(c) restraints on international trade
(d) tariffs

3. An unfavorable balance of payments situation meant:
(a) a surplus
(b) nothing
(c) equality of inflows and outflows
(d) a deficit

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

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

Short Answer Questions

1. Adam Smith says that voluntary exchange will not take place unless:

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

3. Free markets lead to:

4. The economy functions on the basis of:

5. What kind of international trade is best?

(see the answer key)

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