Chapter 3 Full Test Bank Business Government and Trade

Chapter 3

Velasquez Test Bank

MULTIPLE CHOICE

1. Distributing goods and services, and determining which members of society will receive what, is one of the tasks that must be achieved to have
2. a utilitarian economy.
3. an economic system.
4. free trade.
5. globalization.

Topic: Globalization and the Business System

Learning Objective: 3.1: Explain the impact of globalization on the business system

Skill Level: Understand the Concepts

Difficulty Level: Moderate

1. Which of the following best describes how contemporary societies carry out the production of goods and services, and the distribution of these goods in society?
2. Commands
3. Debate
4. Free trade
5. Traditions

Topic: Globalization and the Business System

Learning Objective: 3.1: Explain the impact of globalization on the business system

Skill Level: Understand the Concepts

Difficulty Level: Moderate

1. A system of normative beliefs that are shared by members of a social group are referred to as
2. free markets.
3. perfect freedom.
4. globalization.
5. ideology.

Topic: Globalization and the Business System

Learning Objective: 3.1: Explain the impact of globalization on the business system

Skill Level: Apply what you know

Difficulty Level: Easy

1. John Locke’s argument for free markets is based on which theory?
2. Utilitarian
3. Human nature
4. Moral rights
5. Values

Topic: Globalization and the Business System

Learning Objective: 3.1: Explain the impact of globalization on the business system

Skill Level: Apply what you know

Difficulty Level: Moderate

1. According to John Locke, if there were no governments, what civil liberties would human beings have?
2. Aggregate demand
3. Invisible hand welfare
4. Natural rights
5. Market resource allocation

Topic: Free Markets and Rights: John Locke

Learning Objective: 3.2: Analyze John Locke’s theory of natural rights as it relates to free markets

Skill Level: Apply what you know

Difficulty Level: Moderate

1. According to John Locke, ________ is the right to depose of possessions and persons as one sees fit.
2. a negative right
3. a state of perfect freedom
4. a community right
5. the invisible hand of market competition

Topic: Free Markets and Rights: John Locke

Learning Objective: 3.2: Analyze John Locke’s theory of natural rights as it relates to free markets

Skill Level: Analyze it

Difficulty Level: Moderate

1. There are several views on property rights, but those different views all have the same assumption, that private property is
2. best controlled by the government.
3. a positive right.
4. best controlled by international rules.
5. a bundle of rights.

Topic: Free Markets and Rights: John Locke

Learning Objective: 3.2: Analyze John Locke’s theory of natural rights as it relates to free markets

Skill Level: Apply what you know

Difficulty Level: Moderate

1. Which of the following is considered to be a weakness of Locke’s views on rights?
2. Locke’s belief that natural rights are negative rights and they do not conflict with positive rights
3. Locke’s belief that human beings are atomistic
4. Locke’s belief that markets should be free because free markets reduce injustice and inequality
5. Locke’s belief that governments should control the rights to life, liberty, and property

Topic: Free Markets and Rights: John Locke

Learning Objective: 3.2: Analyze John Locke’s theory of natural rights as it relates to free markets

Skill Level: Understand the concepts

Difficulty Level: Difficult

1. Who of the following believed that free markets and private property produce greater benefits than government interference could?
2. John Locke
3. Adam Smith
4. David Ricardo
5. Karl Marx

Topic: Free Markets and Utility: Adam Smith

Learning Objective: 3.3: Assess key arguments associated with Adam Smith’s utilitarian view of free markets

Skill Level: Apply what you know

Difficulty Level: Moderate

1. According to Adam Smith’s view of the supply and demand process, how do consumers affect the price of a commodity?
2. When there is not enough supply, consumers will bid the price of an item above the natural price.
3. Producers reap greater profits when the price of the commodity is set below the natural price.
4. When there is a shortage of a commodity, the price will sink to its natural level.
5. Producers strive to achieve a natural pricing level in order to promote social utility.

Topic: Free Markets and Utility: Adam Smith

Learning Objective: 3.3: Assess key arguments associated with Adam Smith’s utilitarian view of free markets

Skill Level: Analyze it

Difficulty Level: Moderate

1. Which of the following best represents Adam Smith’s view of government intervention in advancing public welfare?
2. Governments are responsible for intervening when it benefits the middle class.
3. Governments should let individuals pursue their own self-interests, and buy and sell whatever they wish.
4. Humans do not behave like rational economic creatures and must be forced into such behaviors.
5. Governments can influence a consumer’s desire to save, thereby lowering aggregate demand.

Topic: Free Markets and Utility: Adam Smith

Learning Objective: 3.3: Assess key arguments associated with Adam Smith’s utilitarian view of free markets

Skill Level: Apply what you know

Difficulty Level: Moderate

1. Which of the following is a key assumption made by Adam Smith?
2. Private property is unnecessary to human life.
3. Private property encourages societies to look after each other.
4. Private property is naturally produced.
5. Private property must exist.

Topic: Free Markets and Utility: Adam Smith

Learning Objective: 3.3: Assess key arguments associated with Adam Smith’s utilitarian view of free markets

Skill Level: Understand the concepts

Difficulty Level: Moderate

1. John Maynard Keynes argued that the total demand for goods and services is a combination of three economic sectors. Which of the following represent those three economic sectors?
2. Income, interest rates, and economic depressions
3. Goods, services, and ideas
4. Households, businesses, and governments
5. Unemployment, spending, and inflation

Topic: Free Markets and Utility: Adam Smith

Learning Objective: 3.3: Assess key arguments associated with Adam Smith’s utilitarian view of free markets

Skill Level: Analyze it

Difficulty Level: Moderate

1. Economist David Ricardo developed one of the most important concepts in international trade theory used today. Ricardo’s idea that globalization and free trade boost economic output is based on
2. comparative advantage.
3. injustice.
4. capitalist economics.
5. materialism.

Topic: Free Trade and Utility: David Ricardo

Learning Objective: 3.4: Analyze comparative advantage as a foundation for free trade among nations

Skill Level: Analyze it

Difficulty Level: Difficult

1. According to Adam Smith, differences in things such as labor costs, skills, climate, and natural resources create
2. comparative advantage.
3. opportunity costs.
4. free trade.
5. absolute advantage.

Topic: Free Markets and Utility: Adam Smith

Learning Objective: 3.3: Assess key arguments associated with Adam Smith’s utilitarian view of free markets

Skill Level: Understand the concepts

Difficulty Level: Easy

1. Which of the following is an assumption made by David Ricardo in supporting his claim that comparative advantage creates free trade and supports globalization?
2. The resources used to produce goods can be easily moved from one country to another.
3. Production costs are constant and do not decline with the acquisition of new technology.
4. Workers cannot move from one industry to another.
5. Multinational companies only close when they no longer have comparative advantage.

Topic: Free Trade and Utility: David Ricardo

Learning Objective: 3.4: Analyze comparative advantage as a foundation for free trade among nations

Skill Level: Apply what you know

Difficulty Level: Moderate

1. David Ricardo’s theory of comparative advantage generally ignores rules of international trade. Which of the following is the group that sets rules and guidelines for international trade in an effort to minimize disagreements and conflicts?
2. World Bank
3. U.S. federal government
4. World Trade Organization
5. International Monetary Fund

Topic: Free Trade and Utility: David Ricardo

Learning Objective: 3.4: Analyze comparative advantage as a foundation for free trade among nations

Skill Level: Apply what you know

Difficulty Level: Moderate

1. Which of the following did Karl Marx claim created inequality and worker exploitation?
2. Capitalism
3. Free trade
4. Comparative advantage
5. Alienation

Topic: Karl Marx and Justice: A Critique of Free Markets

Learning Objective: 3.5: Interpret Marxist views on the impact on workers of free trade and free markets

Skill Level: Apply what you know

Difficulty Level: Moderate

1. According to Karl Marx, in a capitalist economy, what type of alienation is a worker experiencing when the worker is forced to work for someone else and makes money for the owner of the workplace?
2. Alienating workers from their own productive work
3. Alienating workers from themselves
4. Alienating workers by denying them control
5. Alienating workers from the products of their labor

Topic: A Critique of Free Markets

Learning Objective: 3.5: Interpret Marxist views on the impact on workers of free trade and free markets

Skill Level: Analyze it

Difficulty Level: Difficult

1. According to Karl Marx, which of the following best describes the way a society organizes itself so that it can produce goods?
2. Social superstructures
3. Historical materialism
4. Principles of justice
5. Relations of production

Topic: A Critique of Free Markets

Learning Objective: 3.5: Interpret Marxist views on the impact on workers of free trade and free markets

Skill Level: Apply what you know

Difficulty Level: Moderate

1. Karl Marx claimed that free markets create inequalities and assume that justice means equality or distribution according to need. What argument do critics of Karl Marx use to dispute his claim?
2. True justice requires the presence of free markets.
3. Free markets can encourage community instead of creating alienation.
4. The principles of justice are difficult to define.
5. The benefits of private property are more important than equality.

Topic: A Critique of Free Markets

Learning Objective: 3.5: Interpret Marxist views on the impact on workers of free trade and free markets

Skill Level: Analyze it

Difficulty Level: Difficult

1. Which of the following best describes a combination of government regulation, partially free markets, and limited property rights?
2. Capitalism
3. Immiseration
4. Mixed economy
5. Communism

Topic: The Mixed Economy, New Forms of Property, and the End of Marxism

Learning Objective: 3.6: Explain the mixed economy and redefinitions of property that affect the business system

Skill Level: Understand the concepts

Difficulty Level: Moderate

1. Which of the following best describes property that consists of nonphysical objects, such as music or information?
2. Private property
3. Copyright
4. Patents
5. Intellectual property

Topic: The Mixed Economy, New Forms of Property, and the End of Marxism

Learning Objective: 3.6: Explain the mixed economy and redefinitions of property that affect the business system

Skill Level: Apply what you know

Difficulty Level: Moderate

1. Which of the following best describes a copyright?
2. An invention of machines, processes, and products that is private property of the individual or organization
3. A nonphysical object such as music or a software program.
4. A specific expression of an idea owned by a person or organization
5. The use of government policies to remedy differences.

Topic: The Mixed Economy, New Forms of Property, and the End of Marxism

Learning Objective: 3.6: Explain the mixed economy and redefinitions of property that affect the business system

Skill Level: Apply what you know

Difficulty Level: Moderate

1. As traditionally communist countries move from economies based on pure socialism to economies that combine the best of socialism and capitalism, there has been great debate. Which of the following best represents the beliefs of followers of Smith and Locke toward mixed economies?
2. Governments will favor business interests.
3. Government intervention tolerated by mixed economies does more harm than good.
4. Allowing businesses to operate without government oversight worsens economic problems.
5. Mixed economies diminish utilitarian benefits of free markets in terms of human rights.

Topic: The Mixed Economy, New Forms of Property, and the End of Marxism

Learning Objective: 3.6: Explain the mixed economy and redefinitions of property that affect the business system

Skill Level: Apply what you know

Difficulty Level: Moderate

SHORT ANSWER

1. Discuss the three types of social devices used to organize activities, motivate people, and determine who owns a society’s resources.

Sample Topic: Globalization and the Business System

Learning Objective: 3.1: Explain the impact of globalization on the business system

1. Discuss John Locke’s interpretation of natural rights.

Sample

Topic: Free Markets and Rights: John Locke

Learning Objective: 3.2: Analyze John Locke’s theory of natural rights as it relates to free markets

1. Discuss John Locke’s idea that, in a state of nature, everyone would be political equals and free of constraints, and how those rights affect American institutions.

Sample

Topic: Free Markets and Rights: John Locke

Learning Objective: 3.2: Analyze John Locke’s theory of natural rights as it relates to free markets

1. According to Adam Smith, how does free market competition provide greater benefits than government interference?

Sample

Topic: Free Markets and Utility: Adam Smith

Learning Objective: 3.3: Assess key arguments associated with Adam Smith’s utilitarian view of free markets

1. Discuss John Maynard Keynes’s criticism of Smith’s free market assumptions.

Sample

Topic: Free Markets and Utility: Adam Smith

Learning Objective: 3.3: Assess key arguments associated with Adam Smith’s utilitarian view of free markets

1. Discuss how Ricardo’s theory of comparative advantage supports the ideas of globalization and free trade.

Sample

Topic: Free Trade and Utility: David Ricardo

Learning Objective: 3.4: Analyze comparative advantage as a foundation for free trade among nations

1. Discuss Karl Marx’s view on how capitalist economies alienate workers.

Sample

Topic: A Critique of Free Markets

Learning Objective: 3.5: Interpret Marxist views on the impact on workers of free trade and

free markets

1. Discuss how governments control the various aspects of a mixed economy.

Sample

Topic: The Mixed Economy, New Forms of Property, and the End of Marxism

Learning Objective: 3.6: Explain the mixed economy and redefinitions of property that affect the business system