Question

1. Which of the following represents an important difference between the United States and a socialist economy?

1. In the U.S., most forms of capital are available to private ownership; in a socialist system, they are generally not.
2. In a socialist system, the government conducts extensive research activities; in the U.S., it does not.
3. The U.S. is an example of pure capitalism; a socialist system is an example of mixed capitalism.
4. In a socialist system, the government decides how much of each kind of good is to be produced; in the U.S., this is left entirely to business firms.
5. The socialist system relies more heavily on markets to answer the basic economic questions.

2. In mixed capitalism, a market demand curve

1. Slopes upward from left to right.
2. Is unaffected by changes in consumers’ incomes and tastes.
3. Shows the amount buyers would like to purchase at various prices.
4. Measures the rate of growth of per-capita output.
5. Shifts as the price falls.

3. A decrease in demand

1. Causes the equilibrium price to rise.
2. Results from a decrease in supply.
3. Increases the quantity sold in the market.
4. Reflects an increasing consumer preference for the item.
5. Means that the demand curve has shifted to the left

  

Answer 1

Answer 1:

Option (a) is correct. United States has a mixed economy (blend of capitalism and socialism). Thus in US, resources are owned by both the private and public entities with majority of capital being available for private ownership. In socialism, resources are owned by government.

Option (b) is incorrect because US government does carry out research activities.

Option (c) is incorrect because US is an example of mixed capitalism whereas a socialist economy is the opposite of capitalism.

Option (d) is incorrect because in US, a lot of goods have regulations regarding production, imposed by government, such as in education abd health sector.

Option (e) is incorrect because market economies are capitalist in nature, not socialist.

Answer 2:

Option (c) is correct. Demand curve of a mixed economy shows how much buyers are willing to consume at each price.

Option (a) is incorrect because demand curve slopes downwards from left to right.

Option (b) is incorrect because consumer's income and tastes affect the demand curve (shift it).

Option (d) is incorrect because demand curve doesn't measure rate of growth of per capita output.

Option (e) is incorrect because change in price causes movement along demand curve, not a shift.

Answer 3:

Option (e) is correct. Decrease in demand shifts demand curve to left.

Option (a) is incorrect because decrease in demand causes equilibrium price to fall.

Option (b) is incorrect because decrease in demand is independent of decrease in supply.

Option (c) is incorrect because decrease in demand decreases quantity sold in market.

Option (d) is incorrect because decrease in demand reflects decreasing consumer preferences for the item.