ECO 156 HOMEWORK #3 Multiple choice. Select the choice that best answers the question. 1. We call the United States economy a mixed capitalist system because: a. we produce guns and butter. b. we consume domestically produced goods as well as imports. c. we consume both goods and services. d. there is a private sector and a government sector. 2. Which of these does not fit with the others? a. competition b. government planning and regulation c. the invisible hand d. free enterprise 3. Adam Smith believed the best way to promote the public interest was to: a. have the government produce most goods and services. b. let people pursue their own self interest. c. wait for individuals to set out to promote the public interest. d. get rid of the price mechanism. 4. Adam Smith believed people are guided by all of the following except: a. the profit motive. b. self-interest. c. the public good. d. the invisible hand. 5. The price system is based on: a. government sets most prices. b. the individual whim of the businessperson who sets it. c. the feelings of the individual buyer. d. the interaction of the forces of supply and demand. 6. Which statement is TRUE? a. American industry is very competitive. b. There is no competition in American industry. c. To have competition you need to have many buyers and many sellers in a market. d. The American oil industry is very competitive. 7. In the United States, nearly all resources are owned by: a. the government. b. business firms. c. individuals. d. foreigners. 8. Wages, rent, interest, and profits flow from: a. business firms to households. b. households to business firms. c. business firms to the government. d. the government to business firms. 9. Private ownership of most of the means of production is common to: a. capitalism and communism. b. capitalism and fascism. c. capitalism and socialism. d. fascism and communism. 10. The five-year plan is the only method of resource allocation of: a. communism. b. socialism. c. capitalism. d. only a and b. 11. The strongest criticism of the capitalist system was written by: a. Adam Smith. b. John Maynard Keynes. c. Rose D. Cohen. d. Karl Marx. 12. Karl Marx said that: a. whoever controlled a society's capital controlled that society. b. in the long run, capitalism would survive. c. the former Soviet Union's communist system was "state capitalism". d. capitalists and workers generally had the same economic interests. 13. The main reason the American farmer can produce more than the farmer in China is that he: a. has more land. b. has more capital. c. has more labor. d. is better trained. 14. In the United States, investment is done: a. entirely by the government. b. mainly by private enterprise. c. about half by the government and half by private enterprise. d. mostly by the government. 15. All modern manufacturing businesses depend on: a. alienation. ...

1. ECO 156 HOMEWORK #3
Multiple choice. Select the choice that best answers the
question.
1. We call the United States economy a mixed capitalist system
because:
a. we produce guns and butter.
b. we consume domestically produced goods as well as imports.
c. we consume both goods and services.
d. there is a private sector and a government sector.
2. Which of these does not fit with the others?
a. competition
b. government planning and regulation
c. the invisible hand
d. free enterprise
3. Adam Smith believed the best way to promote the public
interest was to:
a. have the government produce most goods and services.
b. let people pursue their own self interest.
c. wait for individuals to set out to promote the public interest.
d. get rid of the price mechanism.
4. Adam Smith believed people are guided by all of the
following except:
a. the profit motive.
b. self-interest.
c. the public good.
d. the invisible hand.
5. The price system is based on:

2. a. government sets most prices.
b. the individual whim of the businessperson who sets it.
c. the feelings of the individual buyer.
d. the interaction of the forces of supply and demand.
6. Which statement is TRUE?
a. American industry is very competitive.
b. There is no competition in American industry.
c. To have competition you need to have many buyers and many
sellers in a market.
d. The American oil industry is very competitive.
7. In the United States, nearly all resources are owned by:
a. the government.
b. business firms.
c. individuals.
d. foreigners.
8. Wages, rent, interest, and profits flow from:
a. business firms to households.
b. households to business firms.
c. business firms to the government.
d. the government to business firms.
9. Private ownership of most of the means of production is
common to:
a. capitalism and communism.
b. capitalism and fascism.
c. capitalism and socialism.
d. fascism and communism.

3. 10. The five-year plan is the only method of resource allocation
of:
a. communism.
b. socialism.
c. capitalism.
d. only a and b.
11. The strongest criticism of the capitalist system was written
by:
a. Adam Smith.
b. John Maynard Keynes.
c. Rose D. Cohen.
d. Karl Marx.
12. Karl Marx said that:
a. whoever controlled a society's capital controlled that society.
b. in the long run, capitalism would survive.
c. the former Soviet Union's communist system was "state
capitalism".
d. capitalists and workers generally had the same economic
interests.
13. The main reason the American farmer can produce more
than the farmer in China
is that he:
a. has more land.
b. has more capital.
c. has more labor.
d. is better trained.
14. In the United States, investment is done:
a. entirely by the government.
b. mainly by private enterprise.
c. about half by the government and half by private enterprise.
d. mostly by the government.

4. 15. All modern manufacturing businesses depend on:
a. alienation.
b. government ownership of the means of production.
c. barter.
d. division of labor and specialization.
16. There are about _____ business firms in the United States:
a. 2 million
b. 12 million
c. 27 million
d. 36 million
17. The business firm with one owner is:
a. proprietorship.
b. a partnership.
c. a corporation.
d. none of these.
18. A partnership:
a. must have exactly two owners.
b. must have more than two owners.
c. must have more than one owner.
d. may have more than one owner.
19. A key advantage of a partnership over a proprietorship is:
a. limited liability.
b. division of responsibility.
c. perpetual life of the business firm.
d. none of these.
20. A __________ is a legal person.
a. proprietorship
b. partnership

5. c. corporation
d. business firm
21. Most corporations are:
a. publicly held.
b. very large.
c. very small.
d. none of these.
22. Corporations collect about _____ percent of all business
receipts:
a. 10
b. 30
c. 60
d. 90
23. A key DISADVANTAGE of incorporation is that:
a. you will have to regoranize the corporation whenever an
officer resigns or dies.
b. you will have to charge sales tax.
c. you will have to sell stock.
d. you will have to pay corporate income tax.
24. Corporations are controlled by the:
a. employees.
b. bondholders.
c. common stockholders who elect the board of directors.
d. preferred stockholders.
25. The last to be paid off, whether the corporation does well or
goes bankrupt, are
the:
a. employees.

6. b. bondholders.
c. common stockholders.
d. preferred stockholders.
26. Ownership of a corporation is based on:
a. whether you work for the company.
b. whether you buy from the company.
c. whether you hold the bonds of the company.
d. whether you hold stock in the company.
27. Karl Marx said that value is created by:
a. the worker.
b. the capitalist.
c. the government.
d. money.
28. Which is not investment:
a. the purchase of 100 shares of IBM
b. the construction of a new factory
c. the purchase of a new delivery truck
d. the purchase of new software for your personal computer
29. There are about _____ million business firms in the United
States.
30. A partnership is owned by ____________________ people.
31. The key advantage of incorporation is
________________________________________.
The two main disadvantages of incorporation are:
32. ____________________________________________ and
33. ________________________________________________.
A corporation is owned by its (34)
__________________________ stockholders and its

7. (35) ______________________ stockholders.