Lesson 1.1.6
1.1.6 Free market, mixed and command economies Quiz: Pearson Edexcel Economics, Unit 1
20 questions
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Lesson 1.1.6, Free market, mixed and command economies: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 1: Theme 1: Introduction to markets and market failure, written with Revision Ninja.
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The 20 questions
-
How are resources primarily allocated in a pure free market economy?
- Custom and habit
- Price mechanism
- State planning
- Central committees
-
Who makes resource allocation decisions in a command economy?
- Independent firms
- The price mechanism
- The state
- Private consumers
-
How are resources allocated in a mixed economy?
- Command planning only
- Barter exchange only
- Free market only
- Markets and state
-
Which economist is associated with the idea that the price mechanism coordinates economic activity through an 'invisible hand'?
- John Maynard Keynes.
- Karl Marx.
- Adam Smith.
- Thomas Malthus.
-
Which economist argued that price signals coordinate dispersed information better than central planners?
- Friedrich Hayek
- John Maynard Keynes
- Karl Marx
- Adam Smith
-
Which economist's analysis of capitalism emphasised class conflict and the exploitation of labour?
- Milton Friedman.
- Karl Marx.
- Friedrich Hayek.
- Adam Smith.
-
What key advantage does a free market economy offer to consumers?
- Complete price stability
- Consumer sovereignty
- Guaranteed employment
- Equal income distribution
-
When a bad harvest creates a shortage, what role does a rising price perform for consumers?
- Government intervention
- Incentive to produce
- Signalling surplus
- Rationing function
-
Which of these is a major disadvantage of a command economy?
- Inequality of income
- Exploitation of externalities
- Shortages and surpluses
- Excessive competition
-
An economy with both state-owned services and private competitive firms is classified as what?
- A mixed economy
- A free market
- A command economy
- A black market
-
What is a major advantage of a mixed economy compared to a free market?
- Guaranteed firm profits
- Total price stability
- Correcting market failure
- Elimination of taxes
-
What determines price levels when an economy transitions to a free market system?
- Central planners
- State committees
- Government quotas
- Supply and demand
-
Which economist introduced the concept of the 'invisible hand' in free market theory?
- Friedrich Hayek
- John Maynard Keynes
- Adam Smith
- Karl Marx
-
According to Karl Marx, what do capitalists appropriate from workers in a capitalist system?
- Externalities
- Public goods
- Surplus value
- Transfer payments
-
Friedrich Hayek argued central planners lack access to what crucial element provided by price signals?
- Financial capital
- Physical resources
- Monopoly power
- Dispersed information
-
Free markets may fail to allocate resources efficiently due to the presence of what?
- Profit motives
- Market failures
- Price signals
- Consumer sovereignty
-
Unlike command economies, free market economies typically fail to provide sufficient quantities of what?
- Consumer goods
- Luxury goods
- Public goods
- Private goods
-
Central planning in a command economy often leads to economic inefficiency due to a lack of what?
- Profit incentives
- Government regulation
- Centralised targets
- State ownership
-
A mixed economy combines private market allocation with which other element?
- Zero taxation
- Price controls only
- State intervention
- Barter trade
-
When deciding on intervention in a mixed economy, governments must weigh market failure against what?
- Diminishing utility
- Monopoly profit
- Price elasticity
- Government failure
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