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In a market system, scarce goods are allocated through the operation of |
market prices that are determined by consumers and producers acting in their own self-interest |
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In a command economy, scarce goods are allocated by |
a government-appointed planning board based on the board’s long-term priorities |
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The emergence of MP3 (or iPod) technology is an example of ‘creative destruction’ because |
it has replaced compact discs as a technology used for the storage and transfer of music |
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The phrase ‘invisible hand’ means that |
market prices provide information to consumers regarding products they wish to purchase and to producers regarding products they wish to produce |
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In the circular flow model (markets) |
resource markets provide for the exchange of labor and product markets provide for the exchange of goods and services |
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In the circular flow model (goods and labor) |
businesses sell goods and buy labor; households buy goods and sell labor |
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In the circular flow model, there is a flow |
real goods and services and a flow of money |
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The three major legal forms of business enterprises are |
sole proprietorship, partnership, and corporation |
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Which business enterprise is the most prevalent in terms of numbers? |
Sole proprietorsips |
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Which (business enterprise) is the most dominant in terms of total sales revenues |
Corporations |
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What are the major forms of household income |
Wages and salaries; corporate profits; proprietors’ income; interest income; rents |
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Wages and salaries are _____ profits (corporate and non-corporate profits combines) |
three times more than |
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Durable consumer goods have an expected of _____ and non- durable consumer goods have an expected life of _____ |
3 years or longer; less than 3 years |
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The combined spending on both types of consumer goods is ______ than the total spending on services |
less |
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Self interest helps achieve society’s economic goals because |
as consumers and producers exercise their freedom to act int their own self-interest, markets will produce the desired goods at the lowest possible cost |
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There is a wide variety of desired goods and services in a market system because |
individual wants are diverse |
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What is produced is ultimately determined by |
consumers because if the goods offered are not what consumers want, consumers will not buy them |
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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 |
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The use of capital in the production process |
improves efficiency, increases output, and provides for growth |
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‘Division of labor’ means that workers |
specialize in tasks that take advantage of their individual abilities and skills |
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When an economy relies on specialization |
trade enables individuals to obtain the goods in which they do not have a specialization |
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Barter requires that you |
find a person who has what you want and a person who needs what you have to offer |
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The use of money |
provides a common value that makes buying and selling transactions simpler than would be the case with barter |
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Consider the statement ‘we want money only to part with it’. when people express a desire to ‘have money’ they really want |
the goods and services that money can buy |
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Consider the following statement ‘the market system is a profit-and-loss system’ this statement is |
true because producer decisions are motivated by the attempt to earn profits |
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Consider the follwoing statement ‘competition is the disciplinarian of the market economy’. this statement is |
true because when producers face competition, they are driven to provide goods and services at the lowest possible cost |
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The operation of the market can explain the varied outcomes of these ‘dot-com’ companies because |
shareholders experienced windfalls, creating profit expectations; new firms entered; prices fell; and some firms failed |
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Some large hardware stores such as Home Depot boast of carrying as many as 20000 different products in each store. this volume of goods is the result of |
the choice of consumers regarding what to purchase to satisfy their wants and the choice of producers regarding what to produce to maximize profits |
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