Chp 2
Which of the following are true of the partnership form of business organization?
Partners share profits and losses. Partners pool financial resources and business skills.
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 _________.
facilitating exchange
True or false: Competition among sellers and government diffuses economic power within the economic units that make up an economy.
false
True or false: Money complicates exchange or trade.
false
True or false: Specialization means using available resources to produce a variety of goods and services.
false
True or false: The resource market is the place where resources or the services of households are produced.
false
When every economic unit in a society attempts to achieve its own particular goal, usually requiring delivering something of value to others, it is referred to as ______.
self-interest
Which of the following would be an example of the system accommodating change?
Buyers want more juice and less milk. Producers increase spending only on juice.
Which of the following best describe how goods and services should be produced?
By utilizing the right mix of labor and capital By locating production facilities optimally to hold down production and transportation expenses
Private individuals and businesses are able to utilize property as they wish as a result of:
the right of private property. the ability to negotiate legally binding contracts.
In order to have competition in a market economy, there must be at least _____ or more sellers acting independently in a particular market.
2
Which of the following describe the concept of laissez-faire?
A market system in which only mutually beneficial economic transactions are completed A market system in which the role of government is limited to protecting private property
Which of the following describes a technological advancement?
New and improved methods that reduce production and/or distribution costs The ability of a firm or entrepreneur to gain revenue and economic profit at the expense of rivals by introducing a popular new product The ability to produce better products and processes to replace inferior ones
Which of the following does competition imply?
No insurmountable barriers prevent an industry from expanding or contracting. It enables the economy to adjust to changes in consumer tastes, technology, and resource availability. It provides the economy with the flexibility needed to remain efficient over time.
In the circular flow model, households sell resources to, and buy products from _______.
firms
In the circular flow model ______.
households spend their income in the product market
An active, but limited, government is characteristic of which type of economic system in modern advanced industrial economies?
modern market system
Which of the following are components of the circular flow model?
resource market product market households businesses
Which of the following collectively direct resources to industries that are meeting consumer wants and away from industries that are not meeting consumer wants?
Dollar votes Consumer sovereignty
Modern market economies usually have a(n) ______.
active, but limited, government
A trading system that involves swapping goods for goods and requires a coincidence of wants between the buyer and the seller is called ______.
barter
Which of the following requires a coincidence of wants between a buyer and a seller?
barter
The five questions that every society must address reflect the reality of ________ resources in a world of ________ wants.
limited, unlimited
The term "laissez-faire" refers to
limiting the government's interference in the economy.
A ________ is an institution or mechanism that brings buyers and sellers into contact.
market
Technological improvements or advancements also include new and improved methods that ______ production costs.
reduce
Goods and services are produced efficiently when production is organized in combinations and ways ______.
that minimize the cost per unit of output
Product and resource prices in a market system are determined by ______.
the interaction between buyers and sellers
The name of the 1776 book authored by Adam Smith noting that the operation of a market economy creates unity between private and social interests is called ______.
the wealth of nations
True or false: In a market system, consumers exercise consumer sovereignty, which is crucial in determining the types and quantities of goods purchased.
true
Choose those characteristics that best describe a command system.
A central planning board makes all economic decisions concerning resources. The government owns most property resources.
Which of the following is true of a market system?
A market system is a combination of centralized government initiatives and decentralized actions taken by firms.
If increasing numbers of consumers decide to purchase organically farmed fruit rather than conventionally farmed fruit, how is the market likely to respond?
Conventional fruit profits will fall. Organic fruit profits will rise
Which of the following best illustrates exchange through barter?
Farmer John trades his corn for some of his neighbor's oranges
Human specialization or division of labor contributes to a society's output in which of the following ways?
Specialization makes use of differences in ability. Specialization saves time. Specialization fosters learning by doing.
Which of the following does competition require?
Two or more buyers and two or more sellers acting independently in a particular market Freedom of sellers and buyers to enter or leave markets
Which type of business structure is considered an independent legal entity?
corportation
What is the coordinating mechanism in a market system?
price
The interaction between buyers and sellers in a market system determines ______.
product and resource prices
Rather than produce a wide array of goods and services, it is more efficient for economies to produce goods and services based upon ______.
specialization
The goods and services produced by an economic unit through ______ can be exchanged for a full range of desired products produced by other economic units.
specialization
Identify the five fundamental questions that all economies, whether market or command, must address.
How will the goods and services be produced? How will the system promote progress? What goods and services will be produced? Who will get the goods and services? How will the system accommodate change?
Which of the following is true when there are many buyers and sellers acting independently in a market?
No single buyer or seller can dictate the price of the product or resource because others can undercut that price
Which of the following are found in the product market?
Services Goods
The product market is the place where _______.
businesses sell goods and services and households buy goods and services
In the circular flow model, the market economy creates ______.
continuous flows of goods and services, resources, and money
______ is the human specialization of some process.
division of labor
In a market economy, goods and services are distributed ______.
to consumers on the basis of their ability and willingness to pay the existing market price
Which of the following is the reason why every society needs to develop an economic system?
Every society faces the economizing problem.
Which of the following statements describe who will get the goods and services produced in a market economy?
Those who are willing and able to pay for the goods and services Those who have sufficient income and want to spend money on a particular good
Which of the following is the most efficient method of production?
Using a combination of labor, capital and technology
The operation of ______ creates a curious unity between private interests and social interests.
a market system
In the circular flow model, households ______ resources and ______ products.
sell; buy
Which of the following ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services?
Freedom of enterprise
Which of the following occur in the resource market?
Businesses buy resources from households because they are necessary for producing goods and services. Households provide economic resources directly as workers or entrepreneurs. Households sell resources and businesses buy them.
Which characteristics define a command system?
Government ownership of most or all resources A government-appointed central planning board
Which of the following were economic problems faced by the former Soviet Union, Eastern Europe, and China prior to its market reforms?
Incentive problem Coordination problem
Geologists working for ExxonMobil have determined that there exists a high probability that your neighborhood is located above a potentially large oil reserve. As a result, ExxonMobil offers to purchase every owners' property at a substantial price to which everyone agrees. Which of the following does this illustrate?
Mutually agreeable economic transactions
Which of the following functions can a corporation do on its own behalf?
Own assets Acquire resources Incur debts Sue others
Freedom of entry and exit of producers enables an economy to adjust to changes in which of the following areas?
Resource availability Consumer tastes Technology
The basis of competition is freedom of ______ exercised in the pursuit of ______.
choice; money
The market system depends on ______ both among buyers and among sellers.
competition
Two or more buyers and two or more sellers acting independently in a particular product market with the freedom to enter and leave the market best describes ______
competition
In recent years, new MP3 and digital technologies have replaced compact disks. This is an example of ______.
creative destruction
The creation of new products and production methods that completely destroys the market positions of firms that are wedded to existing products and older ways of doing business is called _____.
creative destruction
Competition among economic units ______.
diffuses economic power within the businesses and households that make up the economy. implies that producers can enter or leave an industry
A(n) ______ system is a particular set of institutional arrangements and a coordinating mechanism that responds to the economizing problem.
economic
The most important consequence of property rights is that they ______.
encourage cooperation by ensuring that only mutually agreeable economic transactions take place
Freedom of _________ ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services.
enterprise
Three virtues of the market system include ____, _____, and ______.
incentives freedom efficiency
In a _______ system, people act in their own self-interest.
market
Which of the following represents an institution or mechanism that brings buyers and sellers into contact?
market
Under the market system, ______ coordinate the decisions made by households and businesses.
markets and prices
Money performs several functions, but first and foremost it is a ______.
medium of exchange
What is the type of business structure when two or more individuals agree to own and operate a business together?
partnership
______ ownership of capital gives capitalism its name.
private
________ property rights help to facilitate exchange in a free market system.
private
The "invisible hand" guides firms and resource suppliers to promote ______ even as they seek to further their own interests.
public or social interest
________ is the use of resources by an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services.
specialization
Technological advancements, such as the personal computer and medical discoveries, are primarily driven by the profit motive. However, such advancements eventually promote the public or social interest as though they are guided by _____.
the invisible hand
Which of the following is characterized by the private ownership of resources and the use of markets to coordinate and direct economic activity?
the market system
Advanced technology and capital goods are important because:
the new technology can enhance the productivity of workers the most direct methods of producing a good or service are often the least efficient
