When Comparing the Three Broad Types of Economic Systems, It

question 90

Multiple Choice

When comparing the three broad types of economic systems, it can be said that

• A) for a pure market economy to function efficiently, product supply must be restricted.
• B) in a command economy, state-owned enterprises have little incentive to control costs and be efficient.
• C) the sole role of government in a command economy is to encourage vigorous free and fair competition between private producers.
• D) mixed economies were once uncommon throughout much of the world, although they are becoming more popular now.
• E) production in command economies is determined by the interaction of supply and demand and signaled to producers through the price system.

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Definitions:

Volatility

Volatility is a statistical measure of the dispersion of returns for a given security or market index, indicating the degree of variation from the average over a certain period.

CAPM

The Capital Asset Pricing Model is a formula used to determine the expected return on an investment, factoring in its risk compared to the market.

Required Return

The smallest yearly percentage gain from an investment necessary to entice people or corporations to invest in a certain security or endeavor.

Risk Aversion

The tendency of investors to prefer lower risk or safer investments to avoid potential losses.