Microeconomics Ch. 2 Review

unity, an invisible, efficient, incentives, freedom

A market system promotes ________ between private and public interests. Firms and resource suppliers seem to be guided by _____________ hand allocate the economy's resources efficiently. The two economic arguments for a market system are that it promotes ____________ use of resources and that it uses __________ for directing economic activity. The major noneconomic argument for the market system is that it allows for personal ____________

a. 2 or more buyers and 2 or more sellers acting independently b. Freedom or sellers and buyers to enter or leave markets

Broadly define, competition is present if two conditions prevail; these two conditions are

buy, sovereign, restrain

Consumers vote with their dollars for the production of a good or a service when they _______ it, and because of this, consumers are said to be ___________ in a market economy. The buying decisions of consumers ___________ the possible choices of firms over what they produce so they make what is profitable.

decentralized, centralized, efficient, inefficient, more, adequate

Coordination and decision making in a market economy are _____________, but in a command economy they are __________. The market system tends to produce a reasonably __________ allocation of resources, but in command economies it is ___________ and results in production

least, technology, prices

Firms are interested in obtaining the largest economic profits possible, so they try to produce a product in the ________ costly way. The most efficient production techniques depend on the available ____________ and the _______ of needed resources

markets, prices

In a capitalist economy, individual buyers communicate their demands and individual sellers communicate their supplies in the system of ___________, and the outcomes from economic decisions are set of product and resource _________ that are determined by demand and supply.

privately

In a command economy, property resources are primarily________ owned

a limited

In a market system, government is active, but is assigned _________________ role.

privately

In capitalism, property resources are primarily________ owned

preferences, resources, guiding

In market economies, change is almost continuous in consumer ______________, in the supplies of ____________, and in technology. To make the appropriate adjustments to these changes, a market economy allows price to perform its __________ function.

exchange, wants

In market economies, money functions chiefly as a medium of ___________. Barter between two individuals will take place only if there is a coincidence of ______.

A. What goods/services will be produced B. How will the goods/services be produced C. Who will get the goods and services D. How will the system accommodate change E. How will the system promote progress

List the Five Fundamental Questions every economy must answer.

are not

Self-Interest and selfishness ________ the same thing in a market economy

competition

Self-Interest means that each economic unit attempts to do what is best for itself, but this might lead to a abuse of power in a market economy if it were not directed and constrained by

capital, consumer, capital

Technological advances will require additional __________ goods so the entrepreneur uses profit obtained from the sale of __________ goods to acquire _________ goods

is central planning

The coordinating device(s) in this economic system

enterprise

The freedom of private business to obtain resources and use them to produce goods and services is the freedom of

choice

The freedom to dispose of property or money as a person sees fit is the freedom of

an economic system

The institutional arrangements and coordinating mechanics used to respond to the economic problem are called

income, prices

The market system determines how the total output of the economy will be distributed among its household by determining the _________ of each household by determining the ___________ for each good and service produced.

profit, loss

The market system fosters technological change. The incentive for a firm to be the first to use a new and improved technique of production or to produce a new and better product is a greater economic __________, and the incentive for other firms to follow its lead is the avoidance of a profit ________.

markets and prices

The means used to direct and coordinate economic activity are

property

The ownership of property resources by private individuals and organizations is the institution of private