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This quiz consists of 5 multiple choice and 5 short answer questions through Chapter 2, The Tyranny of Controls.

Multiple Choice Questions

1. The term human capital refers to the:
(a) output produced by a fasting
(b) kinds of inputs the worker uses
(c) personal productive capacity of an individual
(d) machinery in the factory

2. The higher price of pencils results in all but the following:
(a) fewer pencils
(b) the firing of more workers to produce pencils
(c) higher wages for pencil production workers
(d) better worker condiciton for pencil prolduction workers

3. The distribution of income is determined by all but the following:
(a) the price that resource receives in the market
(b) the productive resource supplied
(c) reputation
(d) the quality of the resource

4. What is a good source of information on prices and markets?
(a) a weekly magazine
(b) word of mouth
(c) The Wall Street Journal
(d) the Sunday paper

5. An exchange rate is the:
(a) interest rate in the foreign country
(b) the way trade barriers are established
(c) bill of lading
(d) price of one currency in terms of another currency

Short Answer Questions

1. Prices function to transmit information to all but:

2. Adam Smith says that voluntary exchange will not take place unless:

3. The only kind of capital:

4. The price system functions in such a way that each individual acting in his own best interests, makes everyone better off. This concept is known as the:

5. A market failure occurs when:

(see the answer key)

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