Ch 2 Econ MidtermIn a market system, scarce goods are allocated by

choose command system, a market system, or a laissez-faire system. - A woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area.

command system

The presence in a market of independent buyers and sellers who compete with one another and who are free to enter and exit the market as they each see fit

competition

In the lecture we discuss that businesses are one of three types. Which one of these answers is NOT a type of business discussed in the lecture?

conglomeration

Self-interest helps achieve society's economic goals because

consumers and producers exercise their freedom to act in their own self-interest

What is produced is ultimately determined by

consumers, because if the goods offered are not what consumers want, consumers will not buy them. Correct

The key point from Part 3's presentation was:

creative destruction

invisible hand or creative destruction: "If you compare a list of today's most powerful and profitable companies with a similar list from 30 years ago, you will see lots of new entries."

creative destruction

creative destruction or invisible hand: "Managers in the old Soviet Union often sacrificed product quality and variety because they were being awarded bonuses for quantitative, not qualitative, targets."

invisible hand

invisible hand or creative destruction: "Each day, central planners in the old Soviet Union were tasked with setting 27 million prices—correctly."

invisible hand

invisible hand or creative destruction: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

invisible hand

choose command system, a market system, or a laissez-faire system. - The only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforce contracts between private citizens.

laissez-faire system

price ceilings during a hyperinflation are problematic because

many producers will go out of business because the costs of production will soon exceed the legal selling price.

An institution that brings buyers and sellers together

market

The meaning of the phrase "invisible hand" is that

market prices coordinate the economy by rationing resources and output and by providing incentives to produce the goods and services most desired by society.

In a market system, scarce goods are allocated by

market prices that are determined by consumers and producers acting in their own self-interest.

A Venezuelan-style economic collapse would be less likely in a mixed economy like the United States because

-corruption is less likely when economic power is more diffused - private industry has strong financial incentives to produce efficiently

In a command economy, scarce goods are allocated by

a government-appointed planning board based on the board's long-term priorities.

Find the word that finished this sentence which was the key point in the Part 2 presentation. Without money people would have to "__________"

barter

in the circular flow model,

businesses sell goods and buy labor; households buy goods and sell labor.

True or False: Households sell finished products to businesses.

false

True or False: Money must be issued by a government for people to accept it.

false

Barter requires that you

find a person who has what you want and a person who needs what you have to offer.

The freedom of resource owners to dispose of their resources as they think best; of workers to enter any line of work for which they are qualified; and of consumers to spend their incomes in whatever way they feel is most appropriate

freedom of choice

The freedom of firms to obtain economic resources, decide what products to produce with those resources, and sell those products in markets of their choice

freedom of enterprise

An advantage of using capital in the production process is that it

improves efficiency, increases output, and provides growth.

In market economies, firms rarely worry about the availability of inputs to produce their products, whereas in command economies input availability is a constant concern. This is because

in command economies, no market-pricing mechanism exists to incentivize resource suppliers to increase resource availability when a shortage occurs. Correct

There is such a wide variety of desired goods and services in a market system because

individual wants are diverse

choose command system, a market system, or a laissez-faire system. - Shops stock and sell the goods their customers want, but the government levies a sales tax on each transaction in order to fund elementary schools, public libraries, and welfare programs for the poor.

market system

What each individual or firm believes is best for itself and seeks to obtain

mutually agreeable

The right of private persons and firms to obtain, control, employ, dispose of, and bequeath land, capital, and other property

private property

The market system depends on private property and the protection of property rights to

provide an incentive to maintain the property and allow for the orderly transfer of property ownership

the use of money

provides a common value that makes buying and selling transactions simpler than would be the case with barter.

In the goods and services portion of the circular flow model, there is a flow of

real goods and services and a flow of money

in the circular flow model

resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services.Correct

The emergence of self-driving cars is an example of "creative destruction" because

self-driving cars will likely replace most cars that require drivers.

The term "division of labor" means that workers

specialize in tasks that take advantage of their individual abilities and skills.

Some large hardware stores, such as Home Depot, boast of carrying as many as 20,000 different products in each store. This volume of goods is the result of

the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits.

Consider the statement: "We want money only to part with it." When people express a desire to have money, they really want

the goods and services that money can guy

When an economy relies on specialization,

trade enables individuals to obtain the goods in which they do not have a specialization.

T or F: In the US version of Capitalism, Government plays a substantial role.

true

Consider the following statement: "The market system is a profit-and-loss system." This statement is

true, because producer decisions are motivated by the attempt to earn profits.

Consider the following statement: "Competition is the disciplinarian of the market economy." This statement is

true, because when producers face competition, they are driven to provide goods and services at the lowest possible cost.Correct