Arnold Quiz: Capitalism and Socialism

Quiz
Capitalism and Socialism: Two Views of the World, Two Economic Systems

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1. The way in which a society decides what goods to produce, how to produce them, and for whom the goods will be produced is called: a. an economic system.
b. a laissez-faire system
c. mixed capitalism.
d. pure capitalism.
e. a vision.

2. Which of the following correctly describes mixed capitalism?: a. It is an economic system characterized by largely private ownership of the factors of production.
b. It is an economic system characterized by market allocation of resources.
c. It is an economic system characterized by decentralized decision making.
d. It is an economic system characterized by the fact that most economic activities take place in the private sector, but government plays a substantial economic and regulatory role.
e. It is an economic system characterized by all of the above.

3. Which of the following correctly describes pure capitalism?: a. It is an economic system characterized by private ownership of the factors of production.
b. It is an economic system characterized by market allocation of resources.
c. It is an economic system characterized by decentralized decision making.
d. It is an economic system characterized by the fact that most economic activities take place in the private sector, while government plays a small role in the economy.
e. It is an economic system characterized by all of the above.

4. Which of the following notions correctly fits into the vision of pure capitalism?: a. Prices convey crucial information.
b. Prices are marvelous devices to ration scarce goods and services.
c. Prices provide incentives for consumers and producers alike.
d. Prices are determined by impersonal forces of supply and demand.
e. All of the above statements do.

5. Which of the following notions correctly fits into the vision of pure capitalism?: a. Prices are set by greedy business executives who hold vast economic power over consumers and workers alike.
b. The economic power noted in (a) should be countered by setting maximum prices for consumers.
c. The economic power noted in (a) should be countered by setting minimum prices for labor services.
d. Competition among producers forces them to offer consumers the highest-quality products at the lowest-possible prices.
e. All of the above, except (d).

6. Which of the following notions correctly fits into the vision of pure capitalism?: a. Private property is of the greatest value because "what is common to many is taken least care of."
b. Private property encourages individuals to use their resources in a way that benefits others the least and themselves the most.
c. Government is more likely than private individuals are to use property for the benefit of the many instead of the few.
d. Unless they are careful, or protected by government, ordinary consumers and workers are likely to be exploited during market exchanges.
e. None of the above.

7. Capitalist and socialist thinkers have radically different visions of government:: a. The socialist thinker sees government decision making as promoting the best interests of society as a whole.
b. The socialist thinker sees government decision making as responding to well-organized special-interest groups and not to the unorganized members of the general public.
c. The socialist thinker believes the goal of government officials is to get elected and reelected, not to do "the right thing."
d. The socialist thinker believes that mistakes made by government officials are just as likely to be politically motivated than the unfortunate result of having had insufficient information.
e. The capitalist thinker believes that government serves consumers best by promoting business interests.

8. Which of the following notions correctly fits into the vision of pure capitalism?: a. The separate actions of numerous individuals are likely to have unintended consequences.
b. More often than not, what emerges naturally, through the separate actions of numerous individuals, is also desirable; the establishment of the equilibrium price in a competitive market is a case in point.
c. Both (a) and (b).
d. Only those things that were deliberately created by conscious thought can have desirable consequences.
e. There is no good reason for government to take a "hands off" approach to supply and demand forces.

9. Which of the following statements are correct renderings of the capitalist or socialist visions, respectively?: a. The capitalist vision holds that free markets get people to use their resources in ways that benefit others.
b. The socialist vision holds that free markets enable some people to make themselves better off at the expense of other people.
c. The capitalist vision sees government as made up of people who respond more readily to well-organized special-interest groups than to the general public.
d. The socialist vision sees government as made up of people who want to and will do the right thing by the general public.
e. All of the above.

10. Adherents of pure capitalism are called libertarians. Which of the following is not one of their beliefs?: a. Professional licensing reduces the supply of a service and increases its price.
b. Setting minimum wages is desirable because it guarantees that workers are treated fairly.
c. The monopoly for first-class mail delivery by the U.S. Postal Service should be abolished; competition would drive prices down and quality up.
d. All price floors and ceilings reduce voluntary exchange to a lower level than would exist in a free market; they should be abolished.
e. The free market economy is inherently stable and capable of equilibrating at full-employment output; there is no need for macroeconomic fiscal or monetary policies.

11. Adherents of pure capitalism are called libertarians. Which of the following is not one of their beliefs?: a. The Federal Reserve System should be eliminated; it is an "engine of inflation."
b. All too often, antitrust policy stifles competition and is used to attack firms only because they are big, even when they increase quality and lower price.
c. Import quotas and tariffs increase prices and decrease exchange; they should not be allowed to exist.
d. The Social Security system is acceptable because, during their old age, people get back the money they paid in taxes when they were young.
e. Forced-redistribution welfare programs should be replaced by voluntary charities.

12. Critics of libertarianism state all of the following, except:: a. Libertarians fail to see the merit of allowing government to adjust for third-party effects through taxes.
b. Libertarians fail to see the merit of allowing government to adjust for third-party effects through subsidies.
c. Libertarians fail to see the merit of allowing government to adjust for third-party effects through regulation.
d. Libertarians are wrong to argue that the economy needs government fiscal and monetary policies; it is, in fact, self-regulating at full-employment output.
e. Libertarians do not realize that exchange comes in different varieties; they do not seriously consider the nature of complex exchanges.

13. Which of the following statements correctly identifies the thinking of Karl Marx?: a. The value of a commodity is determined by the socially necessary labor time embodied in it.
b. David Ricardo's labor theory of value is fundamentally flawed.
c. Georg Wilhelm Friedrich Hegel's idea that an event (thesis) generates its opposite (antithesis), leading to a reconciliation of opposites (synthesis), is fundamentally flawed.
d. The idea that Hegel's synthesis turns into a new thesis, starting all over the process noted in (c), is fundamentally flawed.
e. The difference, found under capitalism, between the total value of production and the subsistence wages paid to workers is called the dialectic.

14. According to Marx, a nation will progress through various stages of development. Which one of these is not correctly described below?: a. The first stage of economic development is primitive communism: there is common ownership of property; people produce just enough to survive, there is no surplus value, and no exploitation.
b. The second stage of economic development is slavery: people produce more than they need for survival, the strong enslave the weak and exploit them to garner the surplus value, and there is class conflict.
c. The third stage of economic development is feudalism: slave masters and slaves are replaced by lords and serfs, productivity and output increase enormously, the means of production are increasingly concentrated in a few hands, and the class struggle intensifies.
d. Eventually, a socialist dictatorship of the proletariat is established: capital and land are owned by the proletarian government and the exploitation of workers comes to an end.
e. Still later, the dictatorship of the proletariat withers away and gives rise to pure communism: individuals produce according to their abilities and receive according to their needs, selfishness and greed are gone, and there is no need for a formal government apparatus.

15. All of the following constitute criticisms of the ideas of Karl Marx, with the exception of which one?: a. Labor is hardly the sole source of value; capital, land, and entrepreneurship are also capable of creating value.
b. Capitalism does not produce a large and ever growing "reserve army of the unemployed," which capitalists use to hold wages down to the subsistence level; such unemployment under capitalism has been the exception rather than the rule.
c. Capitalism has increased productivity and output immensely, precisely because the capitalists (Marx's bourgeoisie), in the search for ever higher profits, increasingly exploit the workers (Marx's proletariat).
d. Under capitalism, the competition for workers among business firms puts upward pressure on wages and causes firms to improve working conditions, shorten work hours, and provide fringe benefits.
e. Socialist revolutions have, in fact, not occurred in places, such as the United States and Western Europe, where capitalism has had the longest time to develop and the class struggle has had the longest time to intensify.

16. Which of the following statements correctly identifies command-economy socialism?: a. It is an economic system characterized by government ownership of the nonlabor factors of production.
b. It is an economic system characterized by government allocation of resources.
c. It is an economic system characterized by governmental centralized decision making.
d. All of the above statements do.
e. It is an economic system corresponding to Marx's highest stage of economic development, but all of the other statements here are false.

17. Which of the following statements is not a correct description of command-economy socialism?: a. Most economic activities take place in the public sector, and government plays a very large role in the economy.
b. A central planning agency (called Gosplan in the former Soviet Union) allocates most of the nation's resources.
c. In the former Soviet Union, Gosplan, did a credible job of coordinating economic activities, and satisfying consumer demand, about as well as market forces had done in earlier times.
d. Central planning agencies set the prices of most goods and services.
e. With insufficient information about supply and demand, central planning agencies tend to set disequilibrium prices, creating persistent surpluses or shortages.

18. In the former Soviet Union, shortages and surpluses were common in consumer goods markets. This happened because: a. Gosplan determined supply and demand.
b. Gosplan determined supply and price, but not demand.
c. Gosplan determined demand and price, but not supply.
d. Gosplan determined demand and supply and price and had insufficient information to plot the relevant graphs.
e. Gosplan determined only the price.

19. Which of the following statements about Russia's economic transition in the 1990s is correct?: a. The government is in the process of replacing command-economy socialism with market socialism.
b. The government has implemented a voucher system to privatize many state enterprises.
c. Russian citizens had to buy their privatization vouchers for 10,000 rubles each.
d. Unfortunately, the managers of Russia's new market-socialist enterprises, having been brought up in the old Soviet Union, continue to ignore market signals.
e. Unfortunately, the managers of Russia's new market-socialist enterprises, having been brought up in the old Soviet Union, continue to emphasize the production of industrial raw materials and machines instead of consumer goods.

20. There are many economic hardships in moving from one economic system to another. In Russia, as resources were being reallocated in the 1990s, these have included all of the following, except: a. an increase in the overall level of unemployment.
b. the drafting of the unemployed into "labor armies," in which people are forced to overhaul the crumbling infrastructure (of roads, telephone lines, etc.).
c. a massive decline in industrial output (and smaller declines in the real GDP).
d. a rise in the general level of prices.
e. the appearance of Mafia-like gangs that demand protection money from businesses.