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