Econ Ch. 2.3
Which of the following are examples of intellectual property? (Check all that apply.)
software books and films ideas for new products or new production techniques
Which participants are of greatest importance in determining what goods and services are produced?
Households.
In what ways does a free market economy differ from a centrally planned economy? Unlike a free market economy,
centrally planned economies have extensive government controls.
What role do they play in the working of a market system? Private property rights:
encourage a significant number of people to be willing to risk funds by investing them in business. B. encourage firms to spend money on research and development. correct both a and b.
A(n) entrepreneur is someone who operates a business, bringing together the factors of productionlong dashlabor, capital, and natural resourceslong dashto produce goods and services.
entrepreneur
What is the outcome of enforcing contracts and property rights in a market system?
increased economic activity
If a market system functions well, which of the following is necessary for the enforcement of contracts and property rights?
. an independent court system
What is a free market?
A free market is one where the government does not control the production of goods and services.
The government seeks to protect intellectual property rights by granting
A. patents. B. copyrights. correct: both A and B
Why are independent courts important for a well-functioning economy? Independence is necessary for courts:
A. to make their decisions free of intimidation by criminal gangs. B. to make their decisions based on the law. C. to make their decisions free of influence from other parts of the government. D. to make their decisions free of influence from people with powerful political connections. Correct E. all of the above.
In economics, the term capital refers to
C. goods used to produce other goods.
According to Adam Smith, which of the following is the instrument the invisible hand uses to direct economic activity?
C. prices
In a free market, the actions people take are largely determined by
D. the motivation of financial reward.
What is an entrepreneur?
Entrepreneurs operate businesses that produce goods and services.
Writing in the New York Times, Michael Lewis argued that "...a market economy is premised on a system of incentives designed to encourage an ignoble human trait: self-interest." Source: Michael Lewis, "In Defense of the Boom." New York Times, October 27, 2002. What incentives does a market system provide to encourage self-interest?
Financial reward.
What are the two main categories of participants in markets?
Firms and households.
According to Adam Smith, which of the following is necessary for the proper functioning of the market system
For markets to work, people must be free to pursue their self-interest.
Why do entrepreneurs play a key role in a market system?
They bring together factors of production.
What is the circular-flow diagram and what does it illustrate?
The circular-flow diagram shows how households and firms are linked through product and factor markets.
Evaluate the following argument: "Adam Smith's analysis is based on a fundamental flaw: He assumes that people are motivated by self-interest. But this isn't true. I'm not selfish, and most people I know aren't selfish."
This statement is based on the misconception that following your self-interest and being selfish are the same thing.
In our class discussion we highlighted the argument made by Austrian economist Friedrich Hayek (1899-1992) that the "economic problem of society" is really
about utilizing knowledge that no one person has in totality.
In economic terminology, the inputs used to produce output are referred to as
factors of production.
The Scottish philosopher Adam Smith argued in 1776 that
prices would do a better job of coordinating the activities of buyers and sellers than guilds could.
The primary difference between product markets and factor markets is that
product markets are markets for goods, while factor markets are markets for factors of productionlong dashlabor, capital, natural resources, and entrepreneurial ability.
What are private property rights? Private property rights are:
the rights individuals and firms have to the exclusive use of tangible, physical property and intellectual property.
Property rights are
the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.
A free market exists
when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed.