micro chapter 2 hw
Consider This) Since World War II,
South Korea's market economy has significantly outperformed North Korea's command economy
The market system is said to be characterized by "consumer sovereignty." This is because
firms must match their production decisions to the consumers' choices.
Market economies use capital goods because they improve productive efficiency.
true
Most market economies, such as the U.S. and the U.K., allow government policies and actions aimed at promoting economic growth and stability.
true
Refer to the diagram. Flow 1 (arrow to households) represents
wage, rent, interest, and profit income
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."
Answer the question on the basis of the following information: Suppose 30 units of product A can be produced by employing just labor and capital in the four ways shown below. Assume the prices of labor and capital are $2 and $3, respectively. Which technique is economically most efficient in producing A?
IV labor-5 capital-1
If a nation restricts trade with other nations, then the most likely effect is
If a nation restricts trade with other nations, then the most likely effect is
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?
a. 10 billion b. 100 billion
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. A woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area: b. Shops stock and sell the goods their customers want but the government levies a sales tax on each transaction to fund elementary schools, public libraries, and welfare programs: c. The only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforce contracts between private citizens: (Click to select) Market system Laissez-faire system Command system
a. command system b. market system c. Laissez-faire system
A market system tends to restrict business risk to owners and investors. This results in which of the following benefits?
firms are better able to attract inputs, as these inputs do not have to share the risk.
A company is currently producing 120 chairs per day. Assume the market currently tells us that the least-cost combination of resources to produce 120 chairs is the following: Labor 10 units$12 per unit Land 5 units$30 per unit Capital 8 units$25 per unit Entrepreneurial ability 2 units$15 per unit Now assume the company sells 120 chairs at $4 per unit, and then answer the following questions: What is the company's total revenue? What is the company's total cost?
a. rev-480 b. total cost-500
Economic profits and losses
are essential to the reallocation of resources from less desired to more desired goods
The invisible hand concept suggests that
assuming competition, private and public interests will coincide.
Of the following countries, which one best exhibits the characteristics of a market economy?
canada
(Consider This) In 1975, McDonald's introduced its Egg McMuffin breakfast sandwich, which remains popular and profitable today. This longevity illustrates the idea of
consumer sovereignty.
The term dollar votes in a market system means
consumers "vote" for certain products to be produced by how they spend their incomes.
If competitive industry Y is incurring substantial losses, output will
contract as resources move away from industry Y.
"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the
coordination problem under central planning.
The advent of Netflix movie streaming and Redbox kiosks renting DVD and Blu-ray movies have virtually demolished the market for video rentals from brick and mortar stores such as Blockbuster. This is an example of
creative destruction
Innovation lagged in the centrally planned economies because
enterprises resisted innovation in fear that their production targets would be raised.
In a market system, entrepreneurs start businesses in order to earn a high salary.
false
The economy of the United States in the past can best be described as laissez-faire capitalism.
false
The problems of central planning become less complex as an economy grows in size over time.
false
True or False: Households sell finished products to businesses.
false
True or False: Money must be issued by a government for people to accept it.
false
An economic system
is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.
The French term "laissez-faire" means
let it be
Which of the following is a distinguishing feature of laissez-faire capitalism?
minimal gov. intervention
The most efficient combination of resources in producing a given output is the combination that
minimizes the cost per unit of output.
Copyrights and trademarks are examples of
property rights
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.
In the circular flow model, households earn their incomes in the
resource markets
The economic function of profits and losses is to
signal that resources should be reallocated.
The presence of market failures implies that
there is an active role for government, even in a market system.
