Macro - Ch. 2

D. the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits.

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 A. the purchasing agents at Home Depot who have determined what goods customers want. B. the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to satisfy their wants. C. the purchasing agents at Home Depot who have to determine what goods producers have available. D. the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits.

E. Ted and Fred

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's revenues are $900,000, while costs are $940,000. Who is legally responsible for bearing the $40,000 loss? A. Lawrence, Ted, and Fred B. Fred C. Lawrence D. Ted E. Ted and Fred

C. self-driving cars will likely replace most cars that require drivers.

The emergence of self-driving cars is an example of "creative destruction" because A. self-driving cars will be less expensive to build than current cars. B. it shows that the automobile industry is becoming more efficient. C. self-driving cars will likely replace most cars that require drivers. D. the firms that produce cars today will likely be the main producers of self-driving cars.

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

The market system depends on private property and the protection of property rights to A. establish the cost for the administration and orderly transfer of property. B. provide an incentive to maintain the property and allow for the orderly transfer of property ownership. C. make sure that there are adequate safeguards against theft. D. ensure that those people who own property use it wisely.

D. market prices coordinate the economy by rationing resources and output and by providing incentives to produce the goods and services most desired by society.

The meaning of the phrase "invisible hand" is that A. since buyers and sellers do not usually transact in person, the transactions are invisible. B. market prices are not always known to buyers and sellers. C. no one person or firm actually sets the price of the product. D. market prices coordinate the economy by rationing resources and output and by providing incentives to produce the goods and services most desired by society.

partnership

Franklin, John, Henry, and Harry have decided to pool their financial resources and business skills to open and run a new 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. Their business is a _____.

a. Creative destruction b. Invisible hand c. Invisible hand d. Invisible hand

Identify each of the following quotes as being an example of either the invisible hand or creative destruction. a. "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." b. "Managers in the old Soviet Union often sacrificed product quality and variety because they were being awarded bonuses for quantitative, not qualitative, targets." c. "Each day, central planners in the old Soviet Union were tasked with setting 27 million prices--correctly." d. "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."

C. in command economies, no market-pricing mechanism exists to incentivize resource suppliers to increase resource availability when a shortage occurs.

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 A. in market economies, buyers of inputs can choose what price they are willing to pay for the inputs. B. in market economies, buyers of inputs know that consumers want to purchase the product. C. in command economies, no market-pricing mechanism exists to incentivize resource suppliers to increase resource availability when a shortage occurs. D. in command economies, input availability is determined by central planners who may not correctly respond to consumer demand.

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

a. An advantage of using capital in the production process is that it A. improves efficiency, increases output, and provides for growth. B. replaces labor. C. is more expensive than labor. D. improves efficiency, reduces output, and provides for growth. b. The term "division of labor" means that workers A. share the labor needed to complete a job. B. specialize in tasks that take advantage of their individual abilities and skills. C. develop the skills needed to complete a job. D. identify the products that can be produced so that they can take advantage of their individual abilities and skills. c. When an economy relies on specialization, A. trade is established according to the value of the specialized product. B. centralized coordination is needed to ensure that everyone obtains the goods they need. C. trade enables individuals to obtain the goods in which they do not have a specialization. D. there will be more efficiency in production, but there will be disruptions in the distribution of goods.

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

a. Barter requires that you A. know the market value of all the goods and services that you want and have to offer. B. are a member of an established barter network. C. find a person who has what you want and a person who needs what you have to offer. D. live in an area where there are people with diverse talents and a market with diverse products. b. The use of money A. provides a common value that makes buying and selling transactions simpler as long as there is a single currency in use. B. provides a common value that makes buying and selling transactions simpler than would be the case with barter. C. establishes the value of goods and services. D. provides a common value that makes it easier to barter. c. Consider the statement: "We want money only to part with it." When people express a desire to have money, they really want A. a better paying job. B. the goods and services that money can buy. C. to be rich. D. a larger balance in their checking accounts.

D. true, because producer decisions are motivated by the attempt to earn profits.

a. Consider the following statement: "The market system is a profit-and-loss system." This statement is A. false, because the market system does much more than provide profits and losses. B. false, because consumers purchase only what they want, producers will earn profits. C. true, because consumers purchase only what they want, producers will earn profits. D. true, because producer decisions are motivated by the attempt to earn profits.

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

a. In a market system, scarce goods are allocated by A. market prices that are determined by consumers and producers acting in the public interest. B. estimated prices that are determined by consumers and producers acting in their own self-interest. C. market prices that are determined by consumers and producers acting in their own self-interest. D. fixed prices that are determined by consumers and producers acting in the public interest.

A. resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services. C. businesses sell goods and buy labor; households buy goods and sell labor. C. real goods and services and a flow of money.

a. In the circular flow model, A. resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services. B. goods markets provide for the transfer of money and labor markets provide for the transfer of inputs. C. resource markets provide for the exchange of goods and services and product markets provide for the exchange of labor. D. labor markets provide for the transfer of money and goods markets provide for the transfer of inputs. b. In the circular flow model, A. businesses sell both goods and labor; households buy both goods and labor B. businesses buy goods and sell labor; households sell goods and buy labor. C. businesses sell goods and buy labor; households buy goods and sell labor. D. businesses buy both goods and labor; households sell both goods and labor. c. In the goods and services portion of the circular flow model, there is a flow of A. real goods and services and a flow of labor. B. labor and a flow of money. C. real goods and services and a flow of money. D. real goods and services and a flow of output.

C. many producers will go out of business because the costs of production will soon exceed the legal selling price. - private industry has strong financial incentives to produce efficiently. - inflation is always low in a mixed economy.

a. Price ceilings during a hyperinflation are problematic because A. consumers don't like the goods that producers are offering for sale. B. the excess money supply makes prices too high. C. many producers will go out of business because the costs of production will soon exceed the legal selling price. D. many government officials will become corrupt. b. A Venezuelan-style economic collapse would be less likely in a mixed economy like the United States because - private industry has strong financial incentives to produce efficiently. - corruption is less likely when economic power is more diffused. - mixed economies like the United States usually have a more equal distribution of income. - inflation is always low in a mixed economy.

D. 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. A. individual wants are diverse. D. consumers, because if the goods offered are not what consumers want, consumers will not buy them.

a. Self-interest helps achieve society's economic goals because A. producers know which goods consumers want the most. B. consumers know which goods can be produced at the lowest cost. C. consumers and producers both operate based on society's economic goals. D. 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. b. There is such a wide variety of goods and services in a market system because A. individual wants are diverse. B. consumers change their minds frequently. C. producers determine what to produce. D. there is always a need to produce something new and improved. c. What is produced is ultimately determined by A. producers, because they are driven by profits. B. consumers, because they participate in marketing surveys. C. producers, because they determine what to produce. D. consumers, because if the goods offered are not what consumers want, consumers will not buy them.

a. $10 billion b. $100 billion

a. Suppose that businesses buy a total of $100 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. If households receive $60 billion in wages, $10 billion in rent, and $20 billion in interest, how much are households paid for providing entrepreneurial ability? b. If households spend $55 billion on goods and $45 billion on services, how much in revenues do businesses receive in the product market?