Question

In a free market economy:

a. government has no economic role

b. government ensures that resources are used efficiently

c. less new ideas will be generated than in a centrally planned economy

d. bad ideas will quickly be abandoned because of the competitive process

In order for a nation to trade according to comparative advantage:

a. governments must subsidize domestic companies

b. its government must direct producers to their comparative advantage

c. its government must restrict imports in order to maintain its producers’ comparative advantage

d. its government must allow free trade

According to Adam Smith:

a. if a foreign country can supply us with a commodity cheaper than we can make it, our domestic producers should be protected by trade restrictions

b. the interest of consumers must give way to the interest of producers

c. as individuals attempt to employ their resources to produce the greatest possible value, the best interest of society is also promoted

d. trade restrictions are necessary to develop the domestic economy

Excess burden:

a. is the amount that the burden imposed by a tax exceeds the funding provided by the tax

b. is not significant for majority of the population

c. is not significant with the federal personal income tax

d. does not occur with most taxes

Foreign aid:

a. may amount to subsidizing and strengthening bad government

b. has led to steady economic growth rates for larger aid recipients

c. has consistently proven successful in enhancing economic growth for the recipient country

d. has no effect on economic growth rates of most recipient countries

From 1980 to 2010, China achieved a rapid increase in per capita Real GDP by:

a. imposing quotas on American products

b. actively limiting international trade

c. lowering its tariff rates

d. raising its tariff rates

Government corruption:

a. does not affect the country’s ability to grow economically

b. can never be eliminated

c. discourages rent seeking

d. creates a sense of insecurity and uncertainty for resource owners

Answer 1

1 ans is A. In free market economy, govt don’t have much economic role to play.

2. Ans is D When Govt allows for free trade then both country can mutually  benefit if they trade according to comparative advantage

3. Ans is C. When economy produces a good which they can produce at a lower cost than the competitor then country can better off by trade. Which means country can benefit my producing according to an absolute advantage

4.ans is A. It says decrease in surplus is less than the revenue collected by the government