Law, Business and Society 11th Edition Test Bank

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Chapter 01–Capitalism and the role of governmentChapter 01Capitalism and the Role of GovernmentTrue/False Questions1. The American financial community’s near collapse in late 2008 had been most directlyignited by the subprime mortgage crisis.Answer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-01 Describe capitalism and its relationship to individual rights.Topic: Capitalism Challenged: EconomicsFeedback: The American financial community’s near collapse in 2008 had been most directlyignited by the subprime mortgage crisis; a situation in which the nation’s housing bubbleburst and millions of Americans were no longer able to pay their home mortgages. Instead ofcontinuing their sometimes meteoric rise in value, those homes had plunged in price andmuch of the total real estate market had essentially imploded.2. Capitalism in America was built on the strong philosophical foundation of personalfreedom and private property rights.Answer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-01 Describe capitalism and its relationship to individual rights.Topic: Purpose: What Do We Hope to Accomplish?Feedback: Capitalism in America was built on the strong philosophical foundation ofpersonal freedom and private property rights. Our great natural resources and personalambition led to extraordinary prosperity.3. Democratic capitalism and state capitalism trade with each other for mutual advantage butare economic and political rivals.Answer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-02 Compare and contrast capitalism and collectivism.Topic: Too Much Capitalism? Or Too Little?Feedback: Democratic capitalism and state capitalism trade with each other for mutualadvantage but are economic and political rivals. Democratic capitalism in the United States,Japan, Denmark, and other nations favors business to create wealth and government toregulate as needed. State capitalism in countries such as China, Russia, and Saudi Arabiaemploys the market to build wealth, which, in turn, is controlled and distributed by the state

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Chapter 01–Capitalism and the role of governmentfor its political purposes.4. Capitalism features economic cooperation and varying degrees of centralized control.Answer: FalseAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-02 Compare and contrast capitalism and collectivism.Topic: CommunismFeedback: Collectivist systems feature economic cooperation and varying degrees ofcentralized control as contrasted with capitalism’s economic individualism and politicalfreedom.5. The term collectivism embraces communism and socialism and similar philosophies on theleft side of the political or economic spectrum.Answer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-02 Compare and contrast capitalism and collectivism.Topic: CommunismFeedback: The term collectivism embraces communism and socialism and similarphilosophies on the left side of the political or economic spectrum. Collectivist systemsfeature economic cooperation and varying degrees of centralized control as contrasted withcapitalism’s economic individualism and political freedom.6. Political scientist Benjamin Barber believes that capitalism drags us into decadence byencouraging us to buy as many unnecessary products as we can manage.Answer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-02 Compare and contrastcapitalism and collectivism.Topic: Capitalism Challenged: America in Decline?Feedback: Political scientist Benjamin Barber believes that capitalism drags us intodecadence by encouraging us to buy as many unnecessary products as we can manage, thusreplacing historical principles of hard work and deferred gratification with infantile hungersfor anything that might promise comfort. In America’s version of capitalism, as Barber seesit, we find liberty in commerce. We can buy whatever we want; therefore, we are free.7. Socialism embraces totalitarianism while calling for aggressive government intervention tocorrect economic and social ills.Answer: FalseAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 Easy

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Chapter 01–Capitalism and the role of governmentLearning Objective: 01-03 Differentiate between communism and socialism as collectivistphilosophies.Topic: SocialismFeedback: Socialists provide one answer by rejecting communist totalitarianism andembracing democracy while calling for aggressive government intervention to correcteconomic and social ills. Historically, socialism has often been associated with democraticgovernments and peaceful change, whereas communism has been characterized bytotalitarianism and violent revolution.8. Capitalists fear the irrationality of a society based on competition and unrestrained pursuitof industrial growth.Answer: FalseAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-03 Differentiate between communism and socialism as collectivistphilosophies.Topic: SocialismFeedback: Socialists fear the “irrationality” of a society based on competition andunrestrained pursuit of industrial growth. One of the elements of the socialist agenda isrationality.9. Capitalists consider class distinctions unjust.Answer: FalseAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-03 Differentiate between communism and socialism as collectivistphilosophies.Topic: SocialismFeedback: Class distinctions are anathema to the socialist. Allhumans are equallymeritorious, and distinctions among them are inherently unjust.10. Communists are convinced that problems of market failure mean that the free market issimply incapable of meeting the needs of all segments of society.Answer:FalseAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-03 Differentiate between communism and socialism as collectivistphilosophies.Topic: SocialismFeedback: A critical distinction between socialists and capitalists is that the former believe asociety’s broad directions should be carefully planned rather than left to what some take to bethe whimsy of the market. Furthermore, socialists are convinced that problems of marketfailure (inadequate information, monopoly, externalities, public goods, and so on) mean that

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Chapter 01–Capitalism and the role of governmentthe free market is simply incapable of meeting the needs of all segments of society.11. To pay for its comprehensive welfare benefits, the United States takes 50.1 percent of itsnational income in taxes, the highest rate of any industrialized nation.Answer: FalseAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-04 Evaluate arguments regarding government’s proper role in theglobal, technology-based economy.Topic: American Capitalism in Europe?Feedback: To pay for its cradle-to-grave welfare benefits, Sweden takes about 45 percent ofits national income (gross domestic product-GDP) in taxes, while the United States, incontrast, has one of the developed world’s lowest total tax burdens at about 27 percent ofGDP in recent decades, but down to about 24 percent during the recession.12. Sweden and the other Scandinavian states rely on wise government spending as their keyingredient in a successful market-based economy.Answer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-05 Describe the primary characteristics of a “mixed economy.”.Topic: American Capitalism in Europe?Feedback: For Sweden and the otherScandinavian states, wise government spending is a keyingredient in a successful market-based economy. We should remember, of course, thatSweden is a small, homogeneous nation. Replicating its policies in the United States wouldbe difficult.13. The pure free market approach adds all forms of government including regulatoryagencies, consumer protection, environmental rules, and antitrust law to our business systemand our society.Answer: FalseAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 01-05 Describe the primary characteristics of a “mixed economy.”Topic: Purpose: What Do We Hope to Accomplish?Feedback: The pure free market approach assumes that we can operate our business systemand our society at large free of all but foundational legal mechanisms such as contract andcriminal law. Most forms of government including regulatory agencies, consumer protection,environmental rules, occupational licensure, zoning restrictions, antitrust law, and all but themost basic government services would be eliminated.14. American capitalism, despite its extraordinary success, is criticized for problems ofpoverty, inequality, and unfairness.

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Chapter 01–Capitalism and the role of governmentAnswer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-06 Analyze the impact of capitalism on equality, fairness, andcommunity in American and global societyTopic: The American Dream at Risk?Feedback: American capitalism, despite its extraordinary success, is criticized for problemsof poverty, inequality, and unfairness, among others. The market is driven by and rewardsindividual achievement.15. It is a well-known fact that the United States ranks well on standard social measures andnot so well on standard economic measures.Answer: FalseAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-06 Analyze the impact of capitalism on equality, fairness, andcommunity in American and global society.Topic: The American Dream at Risk?Feedback: Ingeneral, the United States ranks well on standard economic measures and not sowell on standard social measures. America’s 2012 estimated GDP per capita of $50,700ranked 14th in the world behind smaller, more specialized economies such as Qatar (1st at$103,900) and Norway (9th at $55,900) but (as it is showing contrast) well ahead of ourchief industrial rivals such as Germany (29that $39,700) and Japan (38th at $36,900).16. Taking the privatization movement a step further, state and local governments are sellingor leasing existing roads to private companies.Answer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-07 Discuss the theory and practice of privatization.Topic: Capitalism in Practice—“Privatization” in America and AbroadFeedback: Private companies are building, maintaining, and operating new toll roads inplaces such as northern Virginia and suburban San Diego to the Mexican border. Taking theprivatization movement a step further, state, and local governments are selling or leasingexisting roads to private companies. Indiana, for example, leased its 157-mile Indiana East–West Toll Road to an international group for $3.8 billion for 75 years.17. Privatization often brings substantially reduced costs and improved expertise.Answer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-07 Discuss the theory and practice of privatization.

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Chapter 01–Capitalism and the role of governmentTopic: Capitalism in Practice—“Privatization” in America and AbroadFeedback: Privatization often brings substantially reduced costs and improved expertise, butsometimes the transition does not work well. Fury might be the best word to describeconsumer reaction to the higher rates and poor service that accompanied Chicago’s parkingmeter privatization, but Indiana has used the money from its toll road leases to fund apopular, 10-year highway improvement program.18. China’s reliance on cheap labor to drive its economy still remains unchallenged as othernations are unable to undercut the Chinese advantage.Answer: FalseAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-08 Discuss the current state of capitalism in China and Russia.Topic: Coping with Capitalism—China and RussiaFeedback: China’s reliance on cheap labor to drive its economy is threatened as other nationsare able to undercut the Chinese advantage. Despite China’s renewed global prominence andits stunning economic advances, record numbers of professionals reportedly leave annually.19. Extravagant wealth, side-by-side with punishing poverty, is perhaps the greatestdisappointment and injustice, from the critics’ point of view, in the global advance ofcapitalist principles.Answer: TrueAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-09 Describe the income and wealth gaps in America.Topic: The American Dream at Risk?Feedback: Extravagant wealth, side-by-side with punishing poverty, is perhaps the greatestdisappointment and injustice, from the critics’ point of view, in the global advance ofcapitalist principles. The wealthiest 1 percent of Americans now have a greater collective networth than the bottom 90 percent.Multiple Choice Questions20. In the context ofcapitalism in America, which of the following most likely led thegovernment to curb the power of big business?A. Poor foundation of personal freedomB. Lack of private property rightsC. Emergence of monopolistic abuseD. Lack of natural resourcesAnswer: CAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 Medium

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Chapter 01–Capitalism and the role of governmentLearning Objective: 01-01 Describe capitalism and its relationship to individual rights.Topic: Purpose: What Do We Hope to Accomplish?Feedback: Capitalism in America was built on the strong philosophical foundation ofpersonal freedom and private property rights. Our great natural resources and personalambition led to extraordinary prosperity. Monopolistic abuse followed, however, andgovernment grew to curb the power of big business. Thus, America’s substantially freemarket was gradually constrained by government regulation.21. _____ in the United States, Japan, Denmark, and other nations favors business to createwealth and government to regulate as needed.A. DemocraticcapitalismB. State capitalismC. Religious socialismD. Regional socialismAnswer: AAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-02 Compare and contrast capitalism and collectivism.Topic: Too Much Capitalism? Or Too Little?Feedback: Democratic capitalism in the United States, Japan, Denmark, and other nationsfavors business to create wealth and government to regulate as needed. State capitalism incountries such as China, Russia, and Saudi Arabia employs the market to build wealth,which, in turn, is controlled and distributed by the state for its political purposes.22. ____ in countries such as Russia, China, and Saudi Arabia employs the market to buildwealth, which, in turn, is controlled and distributed by the state for its political purposes.A. Regional socialismB. Democratic capitalismC. State capitalismD. Religious socialismAnswer: CAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-08 Discuss the current state of capitalism in China and Russia..Topic: Too Much Capitalism? Or Too Little?Feedback: State capitalism in countries such as China, Russia, and Saudi Arabia employs themarket to build wealth, which, in turn, is controlled and distributed by the state for itspolitical purposes.23. Which of the following countries follows a communist form of government?A. The United StatesB. AustraliaC. ChinaD. The United Kingdom

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Chapter 01–Capitalism and the role of governmentAnswer: CAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearningObjective: 01-03 Differentiate between communism and socialism as collectivistphilosophies.Topic: CommunismFeedback: China follows a communist form of government. Although China, Cuba, NorthKorea, Vietnam, and a few other nations continue to practice communism, the balance of theworld has clearly rejected Marxist-Leninist totalitarianism. China is rapidly andenthusiastically embracing free market practices, with continuing state direction; a strategythat some label state capitalism.24. _____ was particularly concerned about the growing imbalance between rich and poorand felt that the pursuit of wealth and self-interest would erode society’s moral core.A. Ayn RandB. Bo XilaiC. Karl MarxD. Anatole KaletskyAnswer: CAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-03 Differentiate between communism and socialism as collectivistphilosophies.Topic: CommunismFeedback: Karl Marx’s central message concerns the severe abuses that can accompanyunrestrained capitalism. Marx was particularly concerned about the growing imbalancebetween rich and poor. Moreover, he felt that the pursuit of wealth and self-interest woulderode society’s moral core.25. Socialism has been associated with _____.A. self-interest and strong pursuit of individual wealthB. democratic governments and peaceful changeC. totalitarianism and violent revolutionD. economic individualismAnswer: BAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-03Differentiate between communism and socialism as collectivistphilosophies.Topic: SocialismFeedback: Socialists provide one answer by rejecting communist totalitarianism andembracing democracy while calling for aggressive government intervention to correcteconomic and social ills. Historically, socialism has often been associated with democratic

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Chapter 01–Capitalism and the role of governmentgovernments and peaceful change, whereas communism has been characterized bytotalitarianism and violent revolution.26. Identify the correct statement regarding socialists.A. They aim to retain the benefits of industrialism while abolishing the social costs oftenaccompanying the free market.B. They reserve much of their concern for the condition of the middle and higher classes.C. They reject the need for aggressive government intervention to correct economic andsocial ills.D. They embrace communist totalitarianism and reject democracy.Answer: AAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 01-03Differentiate between communism and socialism as collectivistphilosophies.Topic: SocialismFeedback: Socialists aim to retain the benefits of industrialism while abolishing the socialcosts often accompanying the free market. The government is likely to be directly involved inregulating growth, inflation, and unemployment.27. Which of the following statements about socialists is true?A. Socialists feel that the economy must be directed toward the welfare of the successfulcapitalists.B. Socialists reserve much of their concern for the condition of the higher class.C. The harshness of working life is not objected by socialists.D. Class distinctions are anathema to socialists.Answer: DAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-03 Differentiate between communism and socialism as collectivistphilosophies.Topic: SocialismFeedback: Class distinctions are anathema to socialists. All humans are equally meritorious,and distinctions among them are inherently unjust.28. Which of the following statements corresponds to Karl Marx’s beliefs?A. The mode of production in material life determines the general character of the social,political, and spiritual processes of life.B. Unrestrained capitalism would do the society good.C. The pursuit of wealth and self-interest by individuals will continuously build the society’smoral core.D. Competition and unrestrained pursuit of industrial growth is essential for the welfare ofthe capitalists.Answer: A

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Chapter 01–Capitalism and the role of governmentAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 01-03 Differentiate between communism and socialism as collectivistphilosophies.Topic: CommunismFeedback: Karl Marx was particularly concerned about the growing imbalance between richand poor. Moreover, he felt that the pursuit of wealth and self-interest would erode society’smoral core. Marx built an economic interpretation of history, arguing that “the mode ofproduction in material life determines the general character of the social, political, andspiritual processes of life.”29. Which of the following is true of Robert Putnam’s observations on social capital?A. Putnam observed that the practice of free market principles is essential for a moral life.B. Putnam observed that a sharp rise was seen in league bowling from 1980 to 2000, althoughthe number of bowlers decreased by about 10 percent.C. Putnam observed that virtually every measure of social interaction fell significantly fromroughly 1975 to 2000.D. Putnam observed that only three categories of government were necessary: the police, thearmed services, and the law courts.Answer: CAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 MediumLearning Objective:01-09 Discuss the income and wealth gaps in America.Topic: TheAmerican Dream at Risk?Feedback: Robert Putnam’s book explains that virtually every measure of social interaction,from voting to picnics to playing cards, to church attendance, to membership in social clubsfell significantly from roughly 1975 to 2000. The most vivid example was a decline of 40percent in league bowling from 1980 to 2000 although the total number of bowlers increasedby about 10 percent; thus the notion of “bowling alone.”30. Identify the underlying reason why socialists advocate income supports, free education,free health care, generous sick pay, and family planning.A. Socialists believe that the economy must be directed toward the general interest ratherthan left free to multiply the welfare of successful capitalists.B. Socialists seek an excessively individualistic approach to life where the communitarianapproach of capitalism is muted by a concern for the welfare of all.C. Socialists believe that communism harshly restrains individual freedom and creates asociety based on unrestrained pursuit of industrial growth.D. Socialists seek to embrace totalitarianism while calling for aggressive governmentintervention.Answer: AAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 Medium

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Chapter 01–Capitalism and the role of governmentLearning Objective: 01-03 Differentiate between communism and socialism as collectivistphilosophies.Topic: SocialismFeedback: Socialists believe that the economy must be directed toward the general interestrather than left free to multiply the welfare of successful capitalists. Hence, socialistsadvocate income supports, free education, free health care, generous sick pay, familyplanning, and the like to correct the failures of capitalism.31. Which of the following views was advocated by Ayn Rand, the philosopher and novelist?A. The necessary categories of government were only three in number: the police, the armedservices, and the law courts.B. The practice of free market principles is not needed for a rational, moral life.C. The mode of production in material life determines the general character of the social,political, and spiritual processes of life.D. The theory of market fundamentalism is a greater threat to open society today thancommunism.Answer: AAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-04 Evaluate arguments regarding government’s proper role in theglobal, technology-based economy.Topic: Purpose: What Do We Hope to Accomplish?Feedback: The controversial philosopher and novelist Ayn Rand was an uncompromisingadvocate of free market principles. She believed the necessary categories of government wereonly three in number: the police, the armed services, and the law courts.32. The proper balance between _____ remains the central public policy debate in Americanlife.A. open markets and government interventionB. personal freedom and private property rightsC. natural resources and personal ambitionD. intellectual freedom and social orderAnswer: AAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-04 Evaluate arguments regarding government’s proper role in theglobal, technology-based economy.Topic: Purpose: What Do We Hope to Accomplish?Feedback: America’s substantially free market was constrained by government regulation.The proper balance between open markets and government intervention remains perhaps thecentral public policy debate in American life.33. What efforts have been made by Sweden to keep its economy healthy?A. It has taken an aggressive cowboy capitalism approach.

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Chapter 01–Capitalism and the role of governmentB. It has followed a policy of comparatively low corporate taxes.C. It has permitted the sale or lease of public assets to private parties.D. It has attracted billions in private sector investment to take over a few dozen state-controlled companies.Answer: BAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-04 Evaluate arguments regarding government’s proper role in theglobal, technology-based economy.Topic: American Capitalism in Europe?Feedback: In order to keep its economy healthy, Sweden has followed a policy ofcomparatively low total corporate taxes (22 percent as compared with a U.S. rate of 39.2percent,federal and state combined, although with loopholes included, the U.S. effective rateis an estimated 29.2 percent).34. Which of the following is most likely to be a result of a country maintaining its corewelfare commitment in combination with anentrepreneurial spirit?A. An economy of relatively low unemployment, low inflation, and high GDP growthB. An economy that is impoverished and filled with inequalityC. An economy encompassing poverty, oppression, and the rich-poor gapD. An economy that has only state-dominated companies with high employment due to theencouragement of welfare over workAnswer: AAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 01-05 Describe the primary characteristics of a “mixed economy.” (orboth?).Topic: American Capitalism in Europe?Feedback: The pressure of globalization has been felt in Sweden where a more moderate andsomewhat right-center government has pushed aside the left-leaning Social Democrats andhas significantly lowered taxes, privatized some state-dominated companies, and reducedunemployment by encouraging work over welfare. The result is an economy of relatively lowunemployment, low inflation, and high GDP growth.35. In terms of markets and governments, the United States:A. has more faith in government planning.B. has placed less faith in the market.C. chose a capitalist, democratic approach to life.D. reflects a preference for greater central authority.Answer: CAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-05 Describe the primary characteristics of a “mixed economy.”

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Chapter 01–Capitalism and the role of governmentTopic: Purpose: What Do We Hope to Accomplish?Feedback: America’s system of laws can be understood with a firm appreciation for theprinciples of capitalism from which those laws spring. The United States has embraced anevolving capitalist, democratic approach to life.36. In the context of economic systems, the “Third Way” refers to _____.A. totalitarianismB. market socialismC.capitalismD. communismAnswer: BAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-05 Describe the primary characteristics of a “mixed economy.”Topic: American Capitalism in Europe?Feedback: For years, the Nordic states of Sweden, Norway, Denmark, and Finland practicedtheir market socialism or social democracy with such success that it was labeled a “ThirdWay” between the harsher extremes of capitalism and communism. Their welfare statesprovided healthy economic growth with cradle-to-grave social care for all in a systememphasizing the collective welfare over individual preferences.37. Which of the following countries followed the “Third Way” between the harsherextremes of capitalism and communism?A. SwedenB. U.S.AC. ChinaD. RussiaAnswer: AAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-05 Describe the primary characteristics of a “mixed economy.”Topic: American Capitalism in Europe?Feedback: For years, theNordic states of Sweden, Norway, Denmark, and Finland practicedtheir market socialism or social democracy with such success that it was labeled a “ThirdWay” between the harsher extremes of capitalism and communism. Their welfare statesprovided healthy economic growth with cradle-to-grave social care for all in a systememphasizing the collective welfare over individual preferences.38. The pure free market approach assumes that:A. less faith should be placed in the market and more in government planning.B. legal systems in all countries should reflect a preference for greater central authority.C. centralized authority will result in a free government and economy free of corruption.D. business structures and societies can be operated at large freeof all but foundational legalmechanisms.

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Chapter 01–Capitalism and the role of governmentAnswer: DAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-01 Describe capitalism and its relationship to individual rights.Topic: Purpose: What Do We Hope to Accomplish?Feedback: The pure free market approach assumes that we can operate our business systemand our society at large free of all but foundational legal mechanisms such as contract andcriminal law. The wisdom of the market—our individual judgments, in combination with ourindividual consciences—would “regulate” American life.39. Which of the following is true of the criticisms of Robert Putnam’s thesis?A. Robert Putnam was criticized for focusing too much on older activities such as socialclubs.B. Robert Putnam was criticized for focusing too much on emerging interests such as Internetgroups.C. Robert Putnam was criticized for his belief that the necessary categories of governmentwere only three in number: the police, the armed services, and the law courts.D. Robert Putnam was criticized for his belief that state capitalism as practiced in Russia cansucceed in the face of political repression, routine corruption, and abuse of the rule of law.Answer: AAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 01-06 Analyze the impact of capitalism on equality, fairness, andcommunity in American and global society.Topic: The American Dream at Risk?Feedback: Criticism of Robert Putnam’s thesis was abundant with many saying he focusedtoo much on “older” activities such as social clubs and not enough on emerging interests suchas Internet groups. Putnam’s more recent research has produced no convincing evidence ofrising community engagement among adults, but he acknowledges they are reaching oneanother in different ways from the past, principally through social media.40. Identify the result of a growing gap in opportunities among socioeconomic classes ofAmerican children.A. Children of the well-off express increasing trust in those around them.B. Participation in extracurricular activities has fallen sharply for affluent children.C. Young products of affluent America have withdrawn or never undertaken communityengagement.D. Overall community engagement gap between whites and blacks is narrow.Answer: AAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 01-09 Describe the income and wealth gaps in America.Topic: The American Dream at Risk?

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Chapter 01–Capitalism and the role of governmentFeedback: A generation ago, Robert Putnamsays, participation in extracurricular activitiesvaried little by social class, but today participation has risen sharply for affluent childrenwhile falling sharply among those less well-off. One of the results of this opportunity divideis that children of the well-off express increasing trust in those around them while that trusthas “collapsed” among the less well-off children.41. Which of the following involves making a service more expensive at times of peakdemand in order to curb that demand?A. Median pricingB. Clearance pricingC. Predatory pricingD. Congestion pricingAnswer: DAACSB:Analytical ThinkingBlooms: RememberDifficulty: 1 EasyLearning Objective: 01-07 Discuss the theory and practice of privatization.Topic: Capitalism in Practice—“Privatization” in America and AbroadFeedback: While adding to and upgrading infrastructure through privatization, governmentsand their agents are also turning to pricing or market mechanisms to reduce demand for thatinfrastructure. One expanding initiative is congestion pricing that involves making a servicemore expensive at times of peak demand in order to curb that demand.42. Identify a reason why some parents and school boards have adopted a free market “fix.”A. Parents and school boards are convinced that replacing merit-based admission with anauction allowing space to the highest bidders is the only way to raise the academic profile ofan educational institution.B. Parents and school boards hope that competition will push all schools to higherachievement levels.C. Studies reveal that achievement growth rates were twice as high in districts with a freemarket fix than in standard public schools.D. Studies carried out in other countries reveal that market-based approaches such as openenrollment and charter schools work better than direct payment to students of $100 to $500per year for improved performance.Answer: BAACSB:Analytical ThinkingBlooms: UnderstandDifficulty: 2 MediumLearning Objective: 01-07 Discussthe theory and practice of privatization.Topic: Capitalism in Practice—“Privatization” in America and AbroadFeedback: The idea that capitalism was the answer to poor school performance wasunthinkable a few decades ago, but some increasingly frustrated parents and school boardshave adopted a free market “fix.” Schools are experimenting with market-based approachessuch as for-profit web-based classes, open enrollment, charter schools, and vouchers. Thehope is that competition will push all schools to higher achievement levels.

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