Econ 150 CH 2

dollar votes

"votes" that consumers cast for the production of preferred products when they purchase those products rather than the alternatives that were also available.

Which of the following is true of a market system? ...is a combination of centralized gov't initiatives and decentralized actions taken by firms. ...characterized by gov't ownership of sources of production. ...discourages innovation ...discourages competition

...is a combination of centralized gov't initiatives and decentralized actions taken by firms.

Economic systems differ in 2 ways.

1 - who owns the factors of production 2 - the method used to motivate, coordinate, and direct economic activity

Which of the following does competition require? Pick ALL that apply mutually exclusive economic transactions 2 or more buyers and 2 or more sellers acting independently in a particular market 2 or more buyers and 2 or more sellers acting dependently in a particular market freedom of sellers and buyers to enter or leave markets

2 or more buyers and 2 or more sellers acting independently in a particular market freedom of sellers and buyers to enter or leave markets

command system

A method of organizing an economy in which property resources are publicly owned and government uses central economic planning to direct and coordinate economic activities socialism communism

T or F: Money complicates exchange of trade.

False

T or F: The three main decisions that must be addressed by an economic system include which goods to demand, how to motivate employees, and how to distribute goods in a market.

False

Which of the following best illustrates exchange through barter? Farmer John trades his corn for some of his neighbor's oranges. Purchase of 100 acres of farmland for $2 million dollars The daily exchange of stocks and bonds on the NY Stock Exchange

Farmer John trades his corn for some of his neighbor's oranges.

Which of the following describe a command system? Pick ALL that apply: Firms producing what consumers demand Gov't ownership of most or all resources A gov't-appointed central planning board Firms and households acting in their own self-interest

Gov't ownership of most or all resources A gov't-appointed central planning board

residual claimants

In a market system, the economic agent who receives (is claimant to) whatever profit or loss remains (is residual) at a firm after all other input providers have been paid. The residual is compensation for providing the economic input of entrepreneurial ability and flows to the firm's owners.

In the type of capitalism practiced in the US and most other countries, the gov't plays ____ role in the economy. no a minimal a divisive a substantial

a substantial

consumer sovereignty

determination by consumers of the types and quantities of goods and services that will be produced with the scarce resources of the economy consumer's direction of production thru their dollar votes.

_____ is the human specialization of some process. capital efficiency absolute advantage division of labor comparative advantage human capital

division of labor

What determines what goods are produced, how they're produced, who gets them, how to accommodate change, and how to promote technological progress?

economic system

What has to determine what goods are produced, how they are produced, who gets them, how to accommodate change, and how to promote technological progress?

economic system

____ is a particular set of institutional arrangements and a coordinating mechanism that responds to the economizing problem. judicial system democratic system economic system political system

economic system

The title to an automobile or the deed to a cattle ranch assures a buyer that the seller is the legitimate owner of that property. This is an example of property rights _____. encouraging the maintenance of property encouraging innovation facilitating exchange encouraging investment facilitating economic growth

facilitating exchange

An active, but limited gov't is characteristic of which market system in modern advanced economies? free market system centrally planned system command system price-controlled system

free market system

circular flow diagram

illustration showing the flow of resources from households to firms and of products from firms to households. These flows are accompanied by reverse flows of money from firms to households and from households to firms.

The term "laissez-faire" refers to... limiting the govt's interference in the economy the gov't as the dominant force in the economy allowing the gov't to significantly interfere in the economy mixed market or mixed capitalism

limiting the govt's interference in the economy

A ________ is an institution or mechanism that brings buyers and sellers into contact.

market

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

market system

economic system

particular set of institutional arrangements and a coordinating mechanism for solving the economizing problem. method of organizing an economy.

What is the coordinating mechanism in a market system? supply prices governing board

prices

____ ownership of capital gives capitalism its name public government private central board

private

The interaction b/w buyers and sellers in a market system determine ____ and _____ elasticity; prices tastes; preferences product; resource prices supply; demand

product; resource prices

laissez-faire capitalism

pure capitalism hypothetical economic system in which the government's economic role is limited to protecting private property and establishing a legal environment appropriate to the operation of markets in which only mutually agreeable transactions would take place b/w buyers and sellers

In the market system, competition, freedom of choice, self-interest, and personal ____ provide the opportunity and motivation for technological advance.

reward

When every economic unit in a society such as individuals, firms or gov't attempts to achieve their own particular goal usually requiring delivering something of value to others, this is referred to as: trade self-interest greed freedom of choice

self-interest

In order to serve as money, an item must be generally acceptable to ____ in exchange for their goods and services. households sellers banks policymakers

sellers

What is the command system also known as? Pick ALL that apply: socialism laissez-faire communism capitalism

socialism communism

The goods and services produced by an economic unit through ____ can be exchanged for a full range of desired products by other economic units. competition specialization capital intensiveness labor intensiveness

specialization

invisible hand

tendency of competition to cause individuals and firms to unintentionally but quite effectively promote the interests of society even when each individual or firm is only attempting to pursue its own interests.

Product and resource prices in a market system are determined by: gov't setting prices of all products and resources sellers dictating what the price of their goods will be the interaction b/w buyers and sellers buyers dictating how much they will pay for a product or resource

the interaction b/w buyers and sellers

Advanced technology and capital goods are important because: Pick ALL that apply the most direct methods of producing a good or service are often the least efficient the new technology can enhance the productivity of workers the most productive methods are often the least efficient the most direct methods of producing a good or service are often the most efficient.

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

An economic system tends to address ______ goods and services are to be produced, ________ they are to be produced, _________ gets the goods, how to accommodate change and how to promote technological progress.

what; how; who