CH 2 HW Savoie

In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?

Corporations.

The "coincidence of wants" problem associated with barter refers to the fact that:

for exchange to occur each seller must have a product that some buyer wants.

The market system's answer to the fundamental question "What will be produced?" is essentially

"Goods and services that are profitable."

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially

"In ways that minimize the cost per unit of output."

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially

"Those most willing and able to pay for them."

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially

"Through the guiding function of prices and the incentive function of profits."

The market system's answer to the fundamental question "How will the system promote progress?" is essentially

"Through the profit potential that encourages development of new technology."

1. Self-interest helps achieve society's economic goals because 2. There is a wide variety of desired goods and services in a market system because 3. What is produced is ultimately determined by

1. as consumers and producers exercise their freedom to act in their own self-interest markets will produce the desired goods at the lowest possible cost. 2. individual wants are diverse. 3. consumers because if the goods offered are not what consumers want, consumers will not buy them.

1. Barter requires that you 2. The use of money 3. Consider the statement: "We want money only to part with it." When people express a desire to 'have money,' they really want

1. find a person who has what you want and a person who needs what you have to offer. 2. provides a common value that makes buying and selling transactions simpler than would be the case with barter. 3. the goods and services that money can buy.

1. The use of capital in the production process 2 "Division of labor" means that workers 3.When an economy relies on specialization,

1.improves efficiency, increases output, and provides for growth. 2.specialize in tasks that take advantage of their individual abilities and skills. 3.trade enables individuals to obtain the goods in which they do not have a specialization

The market system is often also known as:

Capitalism

Which would not be characteristic of a capitalist economy?

Government ownership of most factors of production

The market system communicates changes in market conditions and elicits appropriate responses from businesses and resource suppliers through changes in prices. This is known as the:

Guiding function of prices

Ted and Fred are the owners of a gas station. They invested $150,000 each and pay an employee named Lawrence $35,000 per year. This year revenues are $900,000, while costs are $940,000. Who is legally responsible for bearing the $40,000 loss?

Ted and Fred

The highly influential book written by Adam Smith is titled:

The Wealth of Nations

Economic systems differ according to which two main characteristics?

Who owns the factors of production, and the methods used to coordinate economic activity.

Decide whether each of the following descriptions most closely corresponds to being part of a command system, a market system, or a laissez-faire system.

a. command system b market system c.Laissez-faire system

Match each of the quotes with the correct term.

a. creative destruction b. incentive problem c. coordination problem d. invisible

a. An institution that brings buyers and sellers together: b. The right of private persons and firms to obtain, control, employ, dispose of, and bequeath land, capital, and other property: c.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: d. 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: e.What each individual or firm believes is best for itself and seeks to obtain f.Economic transactions willingly undertaken by both the buyer and the seller because each feels that the transaction will make him or her better off: g.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:

a. market b.private property c. competition d. freedom of enterprise e. self interest f. Mutually agreeable g. freedom of choice

Specialization-the division of labor-enhances productivity and efficiency by:

all of the means identified in the other answers.

The regulatory mechanism of the market system is:

competition

Broadly defined, competition involves:

independently acting buyers and sellers and freedom to enter or leave markets.

Franklin, John, Henry, and Harry have decided to pool their financial resources and business skills in order to open up and run a coffee shop. They will share any profits or losses that the business generates and will be personally responsible for making good on any debt that their business undertakes.

partnership

In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.

product; resource

The market system depends on private property ownership and the protection of private property rights to

provide an incentive to maintain property and allow for the orderly transfer of property ownership.