#1
Which of the following is a characteristic of a free market economy?
Private ownership of resources
ExplanationIndividuals and businesses can own and control resources.
#2
What is a common purpose of government intervention in markets?
To ensure economic efficiency
ExplanationGovernment actions aim to optimize resource allocation.
#3
What is the effect of a subsidy on producers?
It decreases production costs
ExplanationGovernment support reduces expenses for producers.
#4
Which of the following is an example of a public good?
Roads and highways
ExplanationNon-excludable and non-rivalrous, benefiting society as a whole.
#5
Which of the following is an example of a command economy?
China
ExplanationCentralized government control over resource allocation.
#6
What is the primary function of the Federal Reserve System in the United States?
Monetary policy implementation
ExplanationRegulating money supply and interest rates to achieve economic goals.
#7
Which of the following is an example of a price floor?
Minimum wage
ExplanationSets a minimum price for labor, ensuring workers are paid fairly.
#8
What is the main objective of antitrust laws?
To prevent unfair business practices
ExplanationEnsures fair competition and protects consumers.
#9
In a perfectly competitive market, what happens in the long run?
Firms enter and exit until economic profits are zero
ExplanationCompetition drives profits to zero, leading to efficient allocation.
#10
What is the purpose of a tariff?
To protect domestic industries
ExplanationRaises the price of imports, making domestic goods relatively cheaper.
#11
Which of the following is a tool of monetary policy?
Open market operations
ExplanationBuying and selling government securities to influence money supply.
#12
What is the Laffer Curve used to illustrate?
The relationship between tax rates and government revenue
ExplanationShows the optimal tax rate for maximizing revenue without disincentivizing work.
#13
Which of the following is an example of a regressive tax?
Sales tax
ExplanationImposes a higher burden on lower-income individuals.
#14
What is an externality in economics?
A side effect of an economic activity affecting a third party
ExplanationUnintended consequences affecting parties not involved in the transaction.
#15
Which of the following is a tool of fiscal policy?
Taxation
ExplanationAdjusting tax rates and government spending to influence the economy.
#16
What is the primary purpose of trade barriers?
To protect domestic industries
ExplanationTariffs and quotas restrict imports to shield domestic producers.
#17
Which of the following is an example of a subsidy?
Government payment to farmers
ExplanationFinancial assistance provided by the government to support specific industries.