An Economic System

question 172

Multiple Choice

An economic system

• A)must answer the three economic questions to the satisfaction of everyone in society
• B)must not allow some members of society to gain an unfair advantage when answering the three economic questions
• C)must choose pure capitalism to adequately answer the three economic questions
• D)is a set of social institutions and mechanisms organized to answer the three economic questions
• E)can address problems of scarcity only by embracing the social institution of private property

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Definitions:

Capital Lease

A lease agreement that is classified as a purchase by the lessee for accounting purposes, based on criteria such as ownership transfer or a bargain purchase option.

Asset Turnover Ratio

A financial ratio that measures the efficiency of a company's use of its assets to generate sales revenue, calculated as total revenue divided by average total assets.

Operating Lease

An operating lease is a lease agreement that allows for the use of an asset but does not convey rights similar to ownership of the asset. Operating leases are treated as operating expenses in the income statement.

Lease Criteria

The conditions under which a leasing agreement is classified as either a finance lease or an operating lease in financial accounting.