Basic Economics worksheet - Free Printable

Here are the step-by-step solutions for each question on the worksheet.

Question 1: A market economy is very different from a command economic system or a traditional system. Which of the following is found in a market economy?
* Analysis: In a market economy, businesses compete to sell goods and services to consumers. The government does not control industries or agriculture (that's a command economy). While labor is free, the defining characteristic listed here is competition.
* Selection: B. Competition between businesses.

Question 2: The economic system of communist countries is most closely related to which of the following:
* Analysis: Communist countries typically have economies where the government makes all decisions about production and distribution. This is known as a Command Economy.
* Selection: A. Command economy.

Question 3: How are goods and services exchanged in a traditional economy?
* Analysis: Traditional economies rely on customs and history. They do not use money (prices/wages) or government rules. Instead, people trade items directly for other items, which is called bartering.
* Selection: C. through bartering.

Question 4: Which of the following is NOT one of the basic questions that all economic systems must answer:
* Analysis: Every economy must decide What to produce, How to produce it, and For whom to produce it. "How much" is usually part of the decision on what to produce, but the classic three questions are What, How, and For Whom. However, looking at standard economics curriculums, "How much to produce?" is often considered distinct from "What," but let's look closer. Actually, the standard three are What, How, and For Whom. "How much" is technically part of "What." But often, quizzes include "How much" as a distractor if the list is strictly the big three. Wait, looking at the options again.
* A. What to produce? (Basic Question)
* B. How to produce? (Basic Question)
* D. For whom to produce? (Basic Question)
* C. How much to produce? (This is usually subsumed under "What").
* *Self-Correction:* Actually, in many textbooks, the three questions are exactly What, How, and For Whom. Therefore, "How much" is the odd one out in this specific multiple-choice context.
* Selection: C. How much to produce?

Question 5: In a command economy, economic decisions are made by the _____ that also owns the resources of a nation.
* Analysis: In a command economy, the central authority controls everything. That authority is the government.
* Selection: C. government.

Question 6: There are no truly pure Market economic systems, but which of the following countries is close?
* Analysis: Cuba and China (historically) are command economies. Russia has moved toward a mixed economy but started as command. The United States is widely cited in schools as having the freest market among major nations, making it the closest to a pure market system (though it is actually mixed).
* Selection: D. United States.

Question 7: What is an entrepreneur?
* Analysis: An entrepreneur is someone who takes a risk to start a new business venture.
* Selection: A. A person who starts a new business.

Question 8: Most democratic nations have _______ economies.
* Analysis: Democratic nations usually allow private property and free markets, but they also have government regulations and public services. This combination is called a Mixed Economy.
* Selection: A. mixed.

Question 9: True or False: In a market economy, the price of goods and services are set or controlled by the government.
* Analysis: In a market economy, prices are determined by supply and demand (buyers and sellers), not the government. Government control of prices is a feature of a command economy.
* Answer: False.

Question 10: True or False: There are no countries that are pure command or pure market.
* Analysis: Pure theoretical systems don't exist in reality. Even the freest markets have some taxes/regulations, and even the strictest command economies have black markets.
* Answer: True.

Final Answer:
1. B
2. A
3. C
4. C
5. C
6. D
7. A
8. A
9. False
10. True