Chapter 2 Econ

The use of capital in the production process improves efficiency, increases output, and provides for growth. improves efficiency, reduces output, and provides for growth. replaces labor. is more expensive than labor.

improves efficiency, increases output, and provides for growth.

The emergence of MP3 (iPod) technology is an example of "creative destruction" because the firms that produced compact discs now produce DVDs. it is less expensive than compact discs for the storage and transfer of music. the MP3 (iPod) industry is becoming more efficient. it has replaced compact discs as a technology used for the storage and transfer of music.

it has replaced compact discs as a technology used for the storage and transfer of music.

In a command economy, scarce goods are allocated by

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

In the circular flow model businesses buy goods and buy labor; households sell goods and sell labor. businesses buy goods and sell labor; households sell goods and buy labor. businesses sell goods and sell labor; households buy goods and buy labor. businesses sell goods and buy labor; households buy goods and sell labor

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

Barter requires that you

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

In a market system, scarce goods are allocated through the operation of market prices that are determined by consumers and producers acting in their own self-interest. market prices that are determined by consumers and producers acting in the public's interest. fixed prices that are determined by consumers and producers acting in the public interest. estimated prices that are determined by consumers and producers acting in their own self-interest.

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

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 labor. real goods and services and a flow of money. real goods and services and a flow of output. labor and a flow of money.

real goods and services and a flow of money

In the circular flow model, goods markets provide for the transfer of money and labor markets provide for the transfer of inputs. resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services. resource markets provide for the goods and services and product markets provide for the exchange of labor. labor markets provide for the transfer of money and goods markets provide for the transfer of inputs.

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

"Division of labor" means that workers develop skills needed to complete a job. share the labor needed to complete a job. identify the products than can be produced so that they can take advantage of their individual abilities and skills. specialize in tasks that take advantage of their individual abilities and skills

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

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 buy. a larger balance in their checking accounts. to be rich. a better paying job.

the goods and services that money can buy.

When an economy relies on specialization centralized coordination is needed to ensure that everyone obtains the goods they need. trade is established according to the value of the specialized product. there will be more efficiency in production, but there will be disruptions in the distribution of goods. trade enables individuals to obtain the goods in which they do not have a specialization.

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