Chapter 2 M-C - Multiple choice answer key PDF

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CHAPTER 2 MULTIPLE-CHOICE QUESTIONS An asterisk indicates the correct answer. 1.

Those who work in the field of comparative economic systems a. study the impact of the economic system on economic outcomes. b. treat the economic system as an input to economic outcomes. c. provide exact quantitative measures of the economic system. d. avoid the use of microeconomic analysis. e. both a and b are correct.*

2.

Modern comparative economists would object to the definition of economic systems only in terms of property ownership arrangements, because a. they recognize that ownership arrangements are not important. b. there is some private ownership of property in every economic system. c. ownership arrangements are only one aspect of the economic system.* d. resource allocation procedures are much more important than property ownership. e. all of the above.

3.

The modern approach to defining economic systems a. is based on the ”isms” of capitalism and socialism. b. emphasizes resource allocation arrangements over incentive systems. c. defines economic systems according to a number of characteristics.* d. recognizes that defining economic systems is impossible. e. none of the above.

4.

The major attributes of an economic system are a. its population and capital resources. b. its level of GDP. c. its level of GDP per capita. d. its economic policies. e. none of the above.*

5.

Which of the following is not a major attribute of an economic system? a. Organization of decision-making arrangements. b. Mechanisms for providing information and coordination. c. Economic policies. d. The system’s physical and human capital. e. Both c and d are correct.*

6.

Alchian and Demsetz emphasize that one reason for a hierarchy of authority is a. economies of scale. b. risk sharing. c. decentralization. d. the need to monitor team production.* e. all of the above.

7.

One very important characteristic of organizations in the study of comparative economic systems is a. the nature of economies of scale. b. whether they exhibit capitalism or socialism. c. the use of computers in the organization. d. the level of centralization or decentralization of decisions.*

e.

none of the above.

8.

An informationally decentralized system is one that a. processes and utilizes information inefficiently. b. processes and utilizes information at the lowest level in the organization. c. does not exchange information from lower levels to higher levels in the organization. d. generates data by computer. e. both b and c are correct.*

9.

A planned economy is one in which a. subunits are coordinated by directives formulated by a superior agency.* b. subunits are not induced by appropriate incentives to carry out plan directives. c. market allocation is combined with planned allocation. d. a ministerial system prevails. e. none of the above.

10.

Indicative planning a. allows the market to serve as the principal instrument of resource allocation. b. produces legally binding targets. c. is incompatible with democracy. d. seeks to project trends for the economy. e. both a and d are correct.*

11.

The two major native coordinating mechanisms for an economic system are a. indicative and command planning. b. moral and economic incentives. c. team production and individual production. d. market and plan.* e. none of the above.

12.

Property ownership rights include a. disposition and utilization. b. disposition, utilization, and the right to use the products and services generated.* c. disposition, utilization, and team production. d. disposition, utilization, and economic incentives. e. none of the above.

13.

The major economic systems studied in this book are a. feudalism, capitalism, and communism. b. state capitalism, market capitalism, and planned communism. c. decentralized and centralized systems. d. planned socialism, market socialism, and capitalism.*

14.

Material incentives a. give the recipient a greater claim to goods and services. b. if properly constructed, induce recipients to fulfill desired goals. c. are less effective than moral incentives. d. are less important in affluent societies. e. both a and b are correct.*

15.

Economic systems are a. multidimensional. b. unidimensional. c. mechanisms and institutions for economic decision making and implementation of decisions.

d. e.

defined by the resource base of the economy. both a and c are correct.*

16.

In a perfectly decentralized system a. all authority rests with households and firms.* b. indicative planning prevails. c. command planning prevails. d. decision-making authority is shared by lower and higher authorities. e. none of the above.

17.

Consumer sovereignty means that a. central planning is absent. b. consumers elect public officials. c. consumers make the basic decisions on what is to be produced.* d. consumers are not affected by advertising. e. none of the above.

18.

Ownership rights may affect economic outcomes because a. public and private owners may have different time preferences. b. public ownership may mean more attention to social rates of return. c. the distribution of income is affected by ownership arrangements. d. answers a and b are correct. e. answers a, b, and c are correct.*

19.

Which of the following is not a characteristic of market socialism? a. Centralized decision making.* b. Market allocation. c. State or collective ownership. d. Combination of moral and economic incentives. e. All are characteristic of market socialism.

20.

Comparative economics is concerned with a. the analysis of economic problems across comparable economic settings.* b. how economic systems influence economic outcomes. c. how public and private ownership of property differ in their effects on economic outcomes. d. a and b are correct. e. none of the above.

21.

Planned economies are economies wherein a. the market is the primary mechanism of resource allocation. b. subunits are generally coordinated by instructions from a superior agency.* c. private ownership generally prevails. d. all of the above. e. none of the above.

22.

Two factors generally believed to be important in the analysis of levels of decision making are a. incentives and ownership. b. authority and information.* c. level of economic development and ideological focus. d. all of the above. e. none of the above.

23.

In a market capitalist economic system, property rights are predominantly a. public. b. private.*

c. d. e.

centralized. decentralized. none of the above.

24.

Moral incentives generally refer to a. direct money payments made to participants. b. supplements to direct money payments, such as bonuses. c. rewards that do not give the recipient greater command over goods and services but rather serve to reward desirable behavior.* d. all of the above. e. none of the above

25.

Principals and agents are different people. An agent is a party a. who has controlling authority in an organization. b. who acts on behalf of a principal.* c. with equity rights in the organization. d. a and b are correct. e. none of the above.

26.

According to the text, opportunistic behavior occurs when a lower-level unit of an organization can use its information advantage against the interests of its superiors. This form of behavior, it is argued, can take two forms: a. indicative planning and directive planning. b. planners’ preferences and consumer sovereignty. c. moral hazard and adverse selection.* d. a and b are correct. e. none of the above.

27.

It is often assumed that individuals who participate in organized activity do so within the constraints of bounded rationality. The concept of bounded rationality means that a. individuals may not in fact pursue self-interest. b. individuals face a variety of limitations, for example, in the ability to process information.* c. agents will never pursue goals or objectives set by principals. d. b and c are correct e. none of the above.

28.

According to the text, there are two extremes of organizational structure. These extremes are termed a. planned or market b. corporate or individual proprietorship. c. association based or hierarchy based.* d. a and c are correct. e. none of the above.

29.

Islamic economics prohibits charging interest rates. Which of the following mechanisms are used by banks so that it they make a profit? a. buying mortgages (on cars or homes) b. cost-plus sales c. leasing d. a, b, and c are correct e. c, d are correct*

30.

Which of the following countries have legislated that Islamic principles be used in economics? a. Egypt b. Iraq

c. d. e.

Indonesia Iran* Sudan...