W02 Connect Learn Smart: The Market System (Extra Credit)

The market system depends on ______ both among buyers and among sellers.

competition

In the circular flow model, households sell resources to, and buy products from _______.

firms or Businesses

Select all that apply Which statements about the profit system are true? Multiple select question. 1. It encourages entrepreneurs to make prudent decisions. 2. It exposes employees to business risk. 3. It provides financial incentive for taking large risks. 4. It is actually a profit and loss system.

1. It encourages entrepreneurs to make prudent decisions. 4. It is actually a profit and loss system.

Which is considered to be "pure capitalism," in which the role of government is essentially limited to that of protecting private property and establishing a legal environment for enforcing contracts and market activity?

Laissez-faire capitalism

Which of the following represents an institution or mechanism that brings buyers and sellers into contact?

Market

An active, but limited, government is characteristic of which type of economic system in modern advanced industrial economies?

Modern market system

Geologists working for ExxonMobil have determined that there exists a high probability that your neighborhood is located above a potentially large oil reserve. As a result, ExxonMobil offers to purchase every owners' property at a substantial price to which everyone agrees. Which of the following does this illustrate?

Mutually agreeable economic transactions

Which of the following is true when there are many buyers and sellers acting independently in a market?

No single buyer or seller can dictate the price of the product or resource because others can undercut that price.

Who owns most property resources in a command system?

Government

In the circular flow model, households ______ resources and ______ products.

Household (consumers) sell their resources, like labor, and buy products.

The product market is the place where _______.

Households sell resources that businesses buy. Businesses use the resources to produce and sell goods and services that households buy.

Which of the following are components of the circular flow model?

businesses resource market households product market

The basis of competition is freedom of ______ exercised in the pursuit of ______.

choice; money

Two or more buyers and two or more sellers acting independently in a particular product market with the freedom to enter and leave the market best describes ______.

competition

Under the market system, ______ coordinate the decisions made by households and businesses.

markets and prices

What is the coordinating mechanism in a market system?

prices

Select all that apply Choose those characteristics that best describe a command system. Multiple select question. 1. The government owns most property resources. 2. Firms produce according to the demands of consumers. 3. The division of output between capital and consumer goods is decided by market forces. 4. A central planning board makes all economic decisions concerning resources.

1 . The government owns most property resources. 4. A central planning board makes all economic decisions concerning resources.

Which of the following occur in the resource market? (Check all that apply.) Multiple select question. 1. Businesses buy resources from households because they are necessary for producing goods and services. 2. Households provide economic resources directly as workers or entrepreneurs. 3. Households purchase goods and services from firms. 4. Households sell resources and businesses buy them.

1. Businesses buy resources from households because they are necessary for producing goods and services. 2. Households provide economic resources directly as workers or entrepreneurs. 4. Households sell resources and businesses buy them. The place where the goods and services produced by businesses are bought by households is the product market.

Human specialization or division of labor contributes to a society's output in which of the following ways? Multiple select question. 1. Specialization makes use of differences in ability. 2. Specialization saves time. 3. Specialization limits imports and fosters greater levels of exports. 4. Specialization fosters learning by doing.

1. Specialization makes use of differences in ability. 2. Specialization saves time. 4. Specialization fosters learning by doing.

Select all that apply Which of the following allow private individuals and businesses to utilize property as they wish? (Check all that apply.) Multiple select question. 1. The ability to negotiate legally binding contracts 2. Public domain 3. The right of private property 4. The right of public property 5. Negotiation of contracts that are not legally binding

1. The ability to negotiate legally binding contracts 3. The right of private property

Fill in the Blank Question A _____________(one word) is an institution or mechanism that brings buyers and sellers into contact.

1: market or 2: marketplace

In order to have competition in a market economy, there must be at least _____ or more sellers acting independently in a particular market.

2

Which of the following collectively direct resources to industries that are meeting consumer wants and away from industries that are not meeting consumer wants? (Check all that apply.) Multiple select question. 1. Competition among firms 2. Dollar votes 3. Consumer sovereignty 4. High production costs

2. Dollar votes 3. Consumer sovereignty

Select all that apply Which of the following does competition require? (Check all that apply.) Multiple select question. 1. Two or more buyers and two or more sellers acting dependently in a particular market 2. Freedom of sellers and buyers to enter or leave markets 3. Two or more buyers and two or more sellers acting independently in a particular market 4. Mutually exclusive economic transactions

2. Freedom of sellers and buyers to enter or leave markets 3. Two or more buyers and two or more sellers acting independently in a particular market

The market system attracts inputs and focuses owners' attention on risk management by restricting business risk to which two groups? Multiple select question. 1. The government 2. Investors 3. Consumers 4. Owners

2. Investors 4. Owners

Which of the following are true of the partnership form of business organization? Multiple select question. 1. There is a single owner. 2. Partners pool financial resources and business skills. 3. It is an independent legal entity. 4. Partners share profits and losses.

2. Partners pool financial resources and business skills. 4. Partners share profits and losses.

Select all that apply Competition among economic units ______. Multiple select question. 1. is not congruent with the concept of self-interest 2. diffuses economic power within the businesses and households that make up the economy 3. implies that producers can enter or leave an industry 4. should not occur within a market system

2. diffuses economic power within the businesses and households that make up the economy 3. implies that producers can enter or leave an industry

Select all that apply Which of the following best describe how goods and services should be produced? Multiple select question. 1. By utilizing a level of labor equal to the level of capital available to a firm 2. By using cost-maximizing production methods 3. By locating production facilities optimally to hold down production and transportation expenses 4. By utilizing the right mix of labor and capital

3. By locating production facilities optimally to hold down production and transportation expenses 4. By utilizing the right mix of labor and capital

How does the profit system guide entrepreneurs? Multiple select question. 1. By providing methods for assessing and managing risk 2. By eliminating the financial consequences of decisions 3. By punishing them with losses when they choose poorly 4. By rewarding them with profits when they choose wisely

3. By punishing them with losses when they choose poorly 4. By rewarding them with profits when they choose wisely

Which of the following is the most efficient method of production? Multiple choice question.

Using a combination of labor, capital and technology

Select all that apply If increasing numbers of consumers decide to purchase organically farmed fruit rather than conventionally farmed fruit, how is the market likely to respond? Multiple select question. 1. Conventional fruit prices will rise. 2. Organic fruit prices will fall. 3. Organic fruit profits will rise. 4. Conventional fruit profits will fall.

3. Organic fruit profits will rise. 4. Conventional fruit profits will fall.

Multiple Choice Question Which of the following is true of a market system? Multiple choice question. 1. A market system discourages competition. 2. A market system discourages innovation. 3. A market system is characterized by government ownership of sources of production. 4. A market system is a combination of centralized government initiatives and decentralized actions taken by firms

4. A market system is a combination of centralized government initiatives and decentralized actions taken by firms

Identify the five fundamental questions that all economies, whether market or command, must address. (Check all that apply.) Multiple select question. 1. Who will get the goods and services? 2. What will be the price of goods and services produced? 3. How will the system promote progress? 4. How will the system accommodate change? 5. What goods and services will be produced? 6. How will the goods and services be produced? 7. How will the prices of goods and services be determined?

5. What goods and services will be produced? 6. How will the goods and services be produced? 1. Who will get the goods and services? 4. How will the system accommodate change? 3. How will the system promote progress?

Which of the following is characterized by the private ownership of resources and the use of markets to coordinate and direct economic activity?

A market system

The five questions that every society must address reflect the reality of ____________________(scarce/infinite) resources in a world of ____________________(limited/unlimited) wants.

Blank 1: scarce, limited, or finite Blank 2: unlimited, insatiable, limitless, infinite, or endless

Which of the following would be an example of the system accommodating change?

Buyers want more juice and less milk. Producers increase spending only on juice.

How does the market system develop methods for analyzing and managing risk?

By presenting businesses with the economic consequences of their decisions

______ is the human specialization of some process.

Division of labor

Which of the following is the reason why every society needs to develop an economic system?

Every society faces the economizing problem.

True or false: Competition among sellers and government diffuses economic power within the economic units that make up an economy.

False

True or false: Money complicates exchange or trade.

False

True or false: The resource market is the place where resources or the services of households are produced.

False The resource market is the place where resources or the services of resource suppliers are bought and sold.

Which of the following ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services?

Freedom of enterprise

______ ownership of capital gives capitalism its name.

Private

__________(one word) is the use of resources by an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services.

Specialization or Specialize

The name of the 1776 book authored by Adam Smith noting that the operation of a market economy creates unity between private and social interests is called ______.

The Wealth of Nations

Advanced technology and capital goods are important because:

The most direct methods of producing a good or service are often the least efficient. The new technology can enhance the productivity of workers.

Technological advancements, such as the personal computer and medical discoveries, are primarily driven by the profit motive. However, such advancements eventually promote the public or social interest as though they are guided by _____.

The notion of the "invisible hand" asserts that businesses seek to build new and improved products to increase profits. In doing so, those enhanced products increase society's well-being.

Which of the following statements describe who will get the goods and services produced in a market economy?

Those who have sufficient income and want to spend money on a particular good Those who are willing and able to pay for the goods and services

True or false: In a market system, consumers exercise consumer sovereignty, which is crucial in determining the types and quantities of goods produced.

True

The operation of ______ creates a curious unity between private interests and social interests.

a market system

Modern market economies usually have a(n) ______.

active, but limited, government

For a market system to maximize its potential, it must develop methods for ______.

assessing and managing risk

The two major benefits that arise from the market system's restriction of business risk to owners and investors are

attracting inputs and focusing attention.

In the circular flow model, the market economy creates ______.

continuous flows of goods and services, resources, and money

In the circular flow model, the market economy creates ______. Multiple choice question.

continuous flows of goods and services, resources, and money

In recent years, new MP3 and digital technologies have replaced compact disks. This is an example of ______.

creative destruction

The creation of new products and production methods that completely destroys the market positions of firms that are wedded to existing products and older ways of doing business is called _____.

creative destruction

A(n) ______ system is a particular set of institutional arrangements and a coordinating mechanism that responds to the economizing problem.

economic

Three virtues of the market system include ____, _____, and ______.

efficiency freedom incentives

Freedom of ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services.

enterprise

Mutually agreeable economic transactions take place as a result of:

property rights

In the circular flow model ______.

households spend their income in the product market Households (consumers) receive income in the resource market where they supply their most valuable resource, labor and human capital. Firms produce goods, households buy them. Households supply their labor as resources to firms.

The command economies of the former Soviet Union and of Eastern Europe failed due to:

incentive problems. coordination problems.

The term "laissez-faire" refers to

limiting the government's interference in the economy.

In a _______ system, people act in their own self-interest.

market

Money performs several functions, but first and foremost it is a ______.

medium of exchange

In a market system, firm _______are subject to business risk.

owners or entrepreneurs

What is the type of business structure when two or more individuals agree to own and operate a business together?

partnership

The interaction between buyers and sellers in a market system determines ______.

product and resource prices

The "invisible hand" guides firms and resource suppliers to promote ______ even as they seek to further their own interests. Multiple choice question.

public or social interests

A firm's owners are called ______ because they are only paid after employees, suppliers, and lenders have been paid.

residual claimants

When every economic unit in a society attempts to achieve its own particular goal, usually requiring delivering something of value to others, it is referred to as ______.

self-interest

A __________proprietorship is a business owned and managed by a single person.

sole, single, or solitary

The goods and services produced by an economic unit through ______ can be exchanged for a full range of desired products produced by other economic units.

specialization

Goods and services are produced efficiently when production is organized in combinations and ways ______.

that minimize the cost per unit of output

Product and resource prices in a market system are determined by ______.

the interaction between buyers and sellers

In a market economy, goods and services are distributed ______.

to consumers on the basis of their ability and willingness to pay the existing market price