government should not interfere with the operation of the economy.
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Economic systems differ according to which two main characteristics?
answer
Who owns the factors of production and the methods used to coordinate economic activity.
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Command systems are also known as:
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communism.
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A fundamental difference between the command system and laissez-faire capitalism is that, in command systems:
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the division of output is decided by central planning rather than by individuals operating freely through markets.
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Private property:
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encourages owners to maintain or improve their property so as to preserve or enhance value.
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The regulatory mechanism of the market system is:
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competition.
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Broadly defined, competition involves:
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independently acting buyers and sellers and freedom to enter or leave markets.
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Specialization—the division of labor—enhances productivity and efficiency by:
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allowing workers to take advantage of existing differences in their abilities and skills; avoiding the time loss involved in shifting from one production task to another; allowing workers to develop skills by working on one, or a limited number, of tasks.
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Michigan: Has surplus of Autos and wants lettuce.
Texas: Has surplus of Autos and wants apples.
Washington: Has surplus of apples and wants autos.
On the basis of the information, it can be said that:
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no coincidence of wants exists between any two states.
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The use of money contributes to economic efficiency because:
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it promotes specialization by overcoming the problems with barter.
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If competitive industry Z is making substantial economic profit, output will:
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expand in industry Z as more resources will move to that industry.
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From society's point of view, the economic function of profits and losses is to:
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reallocate resources from less desired to more desired uses.
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Economic profits in an industry suggest the industry:
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should be larger to better satisfy consumers' desire for the product.
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If competitive industry Y is incurring substantial losses, output will:
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contract as resources move away from industry Y.
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The competitive market system:
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encourages innovation because successful innovators are rewarded with economic profits.
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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.
Refer to the information. Which technique is economically most efficient in producing A?
answer
IV.
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In a competitive market economy, firms select the least-cost production technique because:
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to do so will maximize the firms' profits.
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The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:
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creative destruction.
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The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of:
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consumer sovereignty.
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The invisible hand refers to the:
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notion that, under competition, decisions motivated by self-interest promote the social interest.
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The invisible hand concept suggests that:
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assuming competition, private and public interests will coincide.
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The incentive problem under communist central planning refers to the idea that:
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workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.
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The simple circular flow model shows that:
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households are on the selling side of the resource market and on the buying side of the product market.
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