Chapter 2 Homework

Which of the following is critical to the success of the market system?

To allow individuals or firms to have exclusive use of their property

Ms. Boulware is the best lawyer and the best secretary in town. She has:

AA in both jobs

A free market exists: A. when the government places absolutely no restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. B. when the government places significant restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. C. when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can be employed. D. only in fiction. There are no markets or economies which even come close to approaching the status of a free market.

C

Property rights are: A. the rights individuals or firms have to the exclusive use of their property within individual culturally defined norms which are inconsistent in each area of the United States. B. the rights individuals or firms have to the exclusive use of their​ property, excluding the right to buy or sell it. C. the rights individuals or firms have to the exclusive use of their​ property, including the right to buy or sell it. D. the rights government has to the exclusive use of all​ property, including the right to buy or sell it.

C

According to the theory of comparative advantage, specialization and free trade will benefit:

all trading partners who specialize in goods where they have comparative advantage

A product produced in a foreign country and purchased by residents of the home country is called:

an import

In the united states, property rights:

are guaranteed by two amendments to the U.S. Constitution

In what type of economy does the government decide how most economic resources will be allocated?

centrally planned economy

The basis for trade is ____________ advantage

comparative

​A(n) __________________ is someone who operates a​ business, bringing together the factors of production, labor, ​capital, and natural resources to produce goods and services.

entrepreneur

In the circular flow model of the economy, __________ are the suppliers of goods and services.

firms

If a country has a comparative advantage in the production of a good, then that country:

has a lower opportunity cost in the production of that good

Two key groups participate in markets. A _________________, consists of all the individuals in a home. ___________________ are suppliers of goods and services. We can use a simple economic model called the _________________________ to see how participants in markets are linked.

household, Firms, circular-flow diagram

The​ knowledge, skills, and education a worker has is known as:

human capital

Contracts, insurance, patents and accounting rules are:

inventions that make a market work better

Adam Smith observed that people pursuing their own self-interest in a free market will actually result in the best interest of society as if these actions were guided by a(n):

invisible hand

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

opportunity cost

When nations specialize in their comparative advantage and engage in trade:

overall standards of living

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?

product markets

What are copyrights designed to accomplish?

protect intellectual property rights

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the___________the payoff to devoting additional resources to that activity.

smaller

The role of the entrepreneur always involves:

taking risks

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

the division of labor

A production possibilities frontier​ (PPF) is A. a curve that illustrates the demand of two goods for the average consumer. B. a curve showing the generally attainable combinations of two products that may be produced with all planned or​ potential, yet undeveloped technology. C. a curve that shows the potential productive capabilities of the frontier​ (defined as the area outside of​ cities) of a developing economy. D. a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology.

D

One of the great benefits of trade is: A. that it makes it possible for society to become better off if​ individuals, firms, and countries specialize in producing goods and services for which they have an absolute advantage. B. that it makes it possible for society to become better off by increasing its production but not its consumption. C. that it provides society what it desires most in life even if it does not enhance the means for achieving its goals. D. that it makes it possible for society to become better off by increasing its consumption.

D

The Scottish philosopher Adam Smith argued in 1776 that: A. guilds would do a better job of coordinating the activities of buyers and sellers than prices could. B. prices would do a better job of coordinating the activities of buyers and sellers than markets could. C. unions would do a better job of coordinating the activities of buyers and sellers than prices could. D. prices would do a better job of coordinating the activities of buyers and sellers than guilds could.

D

The primary difference between absolute and comparative advantage is: A. absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost. B. absolute advantage refers to the ability to produce a good or service at a lower opportunity cost and comparative advantage refers to the ability to produce more of a good or service using the same amount of resources. C. absolute advantage is a concept that was utilized in communist countries and comparative advantage is a capitalist idea. D. absolute advantage can never change while comparative advantage depends on the relative cost of a​ good's resources.

A

The primary difference between product markets and factor markets is that: A. product markets are markets for​ goods, while factor markets are markets for factors of production ​labor, ​capital, natural​ resources, and entrepreneurial ability. .B. product markets are markets for factors of production ​labor, ​capital, natural​ resources, and entrepreneurial​ ability, while factor markets are markets for goods and services. C. product markets produce goods for final sale while the output of factor markets is included in the purchase price of the good itself factors are not sold. D. product markets are generally after factor markets in the distribution chain.

A

When a firm can produce more output from the same level of inputs it is due​ to: A. lower interest rates. B. technological change. C. government intervention. D. None of the above.

B