__________ is the human specialization of some process.
answer
Division of labor
question
Identify the three virtues of the market system.
answer
1. efficiency
2. incentives
3. freedom
question
In a(n) ________ owners bear no personal financial responsibility for the firm's debts and obligations.
answer
LLC
question
Exchange or trade resulting from specialization can and sometimes does occur through _______.
answer
1. barter
2. a coincidence of wants
question
The five questions that every society must address reflect the reality of ________ resources in a world of _________ wants.
answer
limited, unlimited
question
When every economic unit in a society such as individuals, firms or government attempts to achieve their own particular goal usually requiring delivering something of value to others, this is referred to as:
answer
self-interest
question
Pure capitalism is also known as _______ capitalism
answer
laissez-faire
question
A __________ proprietorship is a business owned and managed by a single person.
answer
sole
question
Which of the following are economic problems which were faced by the former Soviet Union, Eastern Europe, and China (prior to its market reforms)?
answer
1. Coordination problems
2. Incentive problems
question
An economic system intends to address ________ goods and services are to be produced, ________ they are to be produced, ______ gets what is produced, how to accommodate change and how to promote technological progress.
answer
what, how, who
question
In the circular flow model:
answer
households spend income in the product market
question
Which of the following would most likely not be an example of a market?
answer
A classroom discussion on the virtues of a competitive market system
question
A _________ is cited as a natural outgrowth of the sole proprietorship.
answer
partnership
question
Which of the following describe a command system?
answer
1. Government ownership of most or all resources
2. A government-appointed central planning board
question
In a market system, private property refers to the right of private firms and individuals, not the _________, to own most property resources such as land and capital.
answer
government
question
Which of the following are components of the circular flow model?
Modern advanced industrial economies usually have:
answer
active, but limited government
question
Over the years, many people have benefited from technological innovations and advancements such as the personal computer and medical discoveries. This illustrates which of the following concepts?
answer
Invisible hand
question
Which of the following are the key components of the market system?
answer
1. Markets
2. Prices
3. Capital
question
A _________ is an institution or mechanism that brings buyers and sellers into contact.
answer
market
question
___________ is a particular set of institutional arrangements and a coordinating mechanism that responds to the economizing problem.
answer
An economic system
question
Which of the following collectively direct or directs resources to industries that are meeting consumer wants and away from industries that are not meeting consumer wants?
answer
1. Consumer sovereignty
2. Dollar votes
question
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:
answer
Wealth of Nations
question
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.
answer
Specialization
question
An economic system intends to address _________ goods and services are to be produced, _________ they are to be produced, __________ gets what is produced, how to accommodate change and how to promote technological progress.
answer
what, how, who
question
Households obtain income in the ________ market in order to buy the goods and services that businesses produce in the _______ market.
answer
resource, product
question
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:
answer
creative destruction
question
The millions of decisions made by households and businesses are highly coordinated with one another by ______ and _______.
answer
markets; prices
question
Capital accumulation refers to the accumulation of:
answer
1. physical capital goods that are required to advance technology
2. physical capital goods that are used to build consumer goods
3. physical capital goods that yield even greater profit income in the future
question
Competition among ___________ and ___________ diffuses economic power within the economic units that make up the economy.
answer
buyers, sellers
question
A central planning board sets the division of output between capital and consumer goods in a ______ system?
answer
command
question
In the type of capitalism practiced in the United States and most other countries, the government plays _________ role.
answer
a substantial
question
The most important consequence of property rights is that they:
answer
encourage cooperation by ensuring that only mutually agreeable economic transactions take place
question
Economic growth, investment, exchange, and maintenance of property are all possible because of _______.
answer
private property rights
question
Innovation, exchange, investment, property maintenance and economic growth are all encouraged by:
answer
property rights
question
Intellectual property is an extension of property rights through:
answer
1. trademarks
2. patents
3. copyrights
question
Freedom of enterprise ensures that ______ and _____ are free to obtain and use economic resources to produce their choice of goods and services and to sell them in their chosen markets.
answer
entrepreneurs;businesses
question
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?
answer
freedom of enterprise
question
True or false: Freedom of choice allows workers to enter any line of work for which they are qualified. It also ensures that consumers are free to buy the goods and services that best satisfy their wants.
answer
True
question
Which of the following refers to the extensive use and rapid development of capital goods in a market system?
answer
advanced technology
question
The interaction of buyers and sellers in a market system determine _________ and _________.
answer
products; resource prices
question
Which of the following is inherent in competition and limits the potential abuse of power?
answer
Diffusion of economic power
question
Which of the following does competition imply:
answer
1. It provides the economy with the flexibility needed to remain efficient over time.
2. No insurmountable barriers prevent an industry from expanding or contracting.
3. It enables the economy to adjust to changes in consumer tastes, technology, and resource availability.
question
The basis of competition is ______ of _______ exercised in the pursuit of _______.
answer
freedom;choice;money
question
True or false: Money complicates exchange or trade.
answer
False
question
Which of the following describe the role of government in the United States' form of capitalism?
answer
1. modifies the distribution of income
2. provides the rules for economic activity
3. provides certain goods and services that would otherwise be under-produced or not produced at all
4. promotes economic stability and growth
question
Mutually agreeable economic transactions take place as a result of:
answer
property rights
question
Which of the following enables owners to employ or dispose of their property and money as they see fit?
answer
freedom of choice
question
True or false: Technology and capital goods are synonymous concepts in a market system.
answer
True
question
In order to have competition in a market economy, there must be at least _________ or more sellers acting independently in a particular market.
answer
2
question
In the circular flow model, businesses will buy resources from and sell products to _______.
answer
1. households
2. other businesses
question
Which of the following does not occur in the resource market?
answer
Households produce goods
question
Which of the following are resources which businesses purchase from households?
answer
1. Land
2. Entrepreneurial ability
3. Labor
4. Capital
question
In a market economy, goods and services are distributed:
answer
to the customers on the basis of their ability and willingness to pay their existing market price
question
Which of the following best describes how goods and services will be produced?
answer
1. by utilizing the right mix of labor and capital
2. by locating production facilities optimally to hold down production and transportation expenses
question
Advanced technology and capital goods are important because
answer
1. the most direct methods a good or service are often the least efficient
3. the most productive methods are often the most efficient
question
In a market system, only a firm's _______ are subject to business risk.
answer
owners
question
Which of the following would be determined in the product market?
answer
The price of a new pair of athletic shoes
question
The definition of business success in the command economies of the former Soviet Union, eastern Europe, and China prior to market reforms was based on:
answer
political savvy
question
For a market system to maximize its potential it must develop methods for assessing and managing ________.
answer
risk
question
Goods and services are produced when production is organized in combinations and ways:
answer
that minimize the cost per unit of output
question
Which of the following is/are found in the product market?
answer
Goods and services
question
Two or more buyers and two or more sellers acting independently with the freedom to enter and leave markets best describes:
answer
competition
question
Which of the following best describe the reasons that specialization increases the total output society derives from limited resources?
answer
1. Specialization saves time
2. Specialization makes use of differences in ability
3. Specialization fosters learning by doing
question
Entrepreneurs will realize _______ if they make wise choice and ______ if they choose poorly.
answer
profit; loss
question
In the circular flow model, households sell resources to, and buy products from __________.
answer
firms
question
Which of the following requires a coincidence of wants between a buyer and a seller?
answer
Barter
question
Which of the following describe the virtue of freedom?
answer
a) Entrepreneurs and workers are free to further their own self-interest, subject to the rewards and penalties imposed by the market system itself.
b) The market system coordinates economic activity to encourage growth and innovation.
c) The market system permits-indeed, it thrives on-freedom of enterprise and choice.
question
The way to get ahead in a command economy, such as in the economies of the former Soviet Union, Eastern Europe, and China prior to market reforms, was through:
answer
participation in the political hierarchy of the Communist party
question
Which of the following describe the virtues of incentives?
answer
1. Hard work, skill acquisition, and innovation
2. Assumption of risk by entrepreneurs to innovate and improve the general standard of living
3. Greater work skills and effort mean greater production and higher incomes leading to higher standards of living
question
The _________ problems faced by the command economies of the former Soviet Union, eastern Europe, and China prior to market reforms became more difficult as the economies expanded and as markets became more complex
answer
coordination
question
Which of the following describes how the market system will promote progress?
answer
Competitive markets create incentives for technological advance and capital accumulation, both of which contribute to promoting progress.
question
In a market system, only a firm's ________ are subject to business risk.
answer
owners
question
In addition to lacking incentives, the command economies of the former Soviet Union, Eastern Europe, and China prior to market reforms also lacked ________.
answer
entrepeurship
question
In a market system, specialization requires exchange. Which of the following best describes the use of money in an exchange?
answer
Money facilitates exchange by ending the need for coincidence of wants usually resulting from barter
question
In order to serve as money, an item must be generally acceptable to _______ in exchange for their goods and services
answer
sellers
question
Both land and labor would be bought and sold in the
answer
resource market
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