11:32 AM Thu Feb 18 1 78% Done Ch 2 and Ch 3 (2 of 51) Chap 2 and Chap 3 True/False Indicate whether the statement is true or false. Communism would fall into the socialism category when classifying economic systems. 2. In a free enterprise economic system, less attention is paid to the income distribution than in a socialist economic system. 3. Free enterprise economies are the only systems that must decide how to answer three economic questions about the production and distribution of goods 4. In free enterprise countries, legal systems and institutions help and do not hinder free enterprise. 5. One of the important freedoms in free enterprise economies is based on the concept that individuals must accept the consequences of their decisions. 6. Even people in favor of free enterprise economics may not like everything that people in the system produce, sell, and buy. 7. One of the characteristics of an ethical free enterprise system is the reward or punishment that reflects how well producers have responded to the preferences of the buying public. 8. The free enterprise system makes value judgments regarding which products should be produced. 9. Households are the only taxpayers shown on the circular flow. 10. Economists agree that increasing tax rates on people would have no effect on the circular flow. 11. An ethical economic system produces the goods and services preferred by the majority of people 12. Excludable public goods are those that individuals cannot be physically prohibited from consuming Multiple Choice Identify the choice that best completes the statement or answers the question. 13. How a society answers the three economic questions defines a. its place in the global economy. b. its economic system. C. its income distribution. d whether it is a pure or mixed economy. 14. f the following is not one of the three economic questions? a. What goods will be produced? b . How much will be produced? C . How will the goods be produced? d. For whom will the goods be produced? 15. Adam Smith believed in the labor theory of value. b . that people's actions are led by "an invisible hand." C . that capitalists exploited workers. d. that surplus value should go to the workers. 16. As a result of globalization, which of the following have increased? foreign exchange trading foreign direct investment C . availability of a good d. All of the above 17. The responsibilities of people in a free enterprise economy include a. being truthful. C. open disclosure b . obeying the law. d. All of the above 18. The amount of money that a business receives from the sale of its production is called a . profit. C. total revenue. b . loss. d. average cost. 19. A negative externality a. has an adverse effect on a third party. has an adverse effect on the consumer