Ch 2 Review Questions – Flashcards
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central planning
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Which of the following is a distinguishing feature of a command system?
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Public ownership of all capital.
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Which of the following is a distinguishing feature of laissez-faire capitalism?
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is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.
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An economic system:
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Government ownership of most property resources.
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Which of the following is not a typical characteristic of a market system?
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independently acting buyers and sellers and freedom to enter or leave markets.
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Broadly defined, competition involves:
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there is more than one seller in a market.
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Competition means that:
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it promotes specialization by overcoming the problems with barter.
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The use of money contributes to economic efficiency because:
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What goods and services will be produced?
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Which of the following is one of the Five Fundamental Questions?
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reallocate resources from less desired to more desired uses.
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From society's point of view, the economic function of profits and losses is to:
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are essential to the reallocation of resources from less desired to more desired goods.
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Economic profits and losses:
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encourages innovation because successful innovators are rewarded with economic profits.
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The competitive market system:
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to do so will maximize the firms' profits.
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In a competitive market economy, firms select the least-cost production technique because:
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"Those willing and able to pay for them."
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The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:
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"Through the profit potential that encourages development of new technology."
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The market system's answer to the fundamental question "How will the system promote progress?" is essentially:
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idea that the decisions of producers must ultimately conform to consumer demands.
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"Consumer sovereignty" refers to the:
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The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.
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Which of the following best describes the invisible-hand concept?
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allocates resources efficiently and allows economic freedom.
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Two major virtues of the market system are that it:
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coordination problem under central planning.
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"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:
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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 incentive problem under communist central planning refers to the idea that:
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Bobbie goes to work and builds cars, and uses the income she receives to buy food at the grocery store.
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Which of the following best illustrates the circular flow model in action?
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Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, where in command systems government decision makers don't bear those costs.
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Which of the following statements is true about risk management in market systems versus command systems?
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consumer sovereignty.
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In 2000, McDonald's introduced its McSalad Shaker, which failed to catch on with the public and was subsequently dropped from the menu. This failure illustrates the idea of:
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because private property encourages people to consider the alternative uses of their resources and select those that provide the most rewards.
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According to economist Donald Boudreaux, the world's tens of billions of individual resources get arranged productively:
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South Korea's market economy has significantly outperformed North Korea's command economy.
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Since World War II:
