Exam 2: The Market System and the Circular Flow

According to economist Donald Boudreaux in the "Last Word" section of the chapter, what best explains why the market system is not a random, chaotic mess?

The market system's answer to the fundamental question "How will the system promote progress?" is essentially

"Consumer sovereignty" means that

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfil the output quantities specified in the central plan caused a chain reaction of adverse repercussions on production." This quotation best identifies the

The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as

One basic problem faced by central planners, but hardly present in a market system, has to do with

(Consider This) Martha's Milkshake Company buys earthquake insurance from the Stable Ground Insurance Company.Based on this purchase, economists would conclude that

Innovation lagged in the centrally planned economies because

The competitive market system

The term dollar votes in a market system means

McDonald's introduced the Big Mac in 1968, and it turned out to be a hit.However, the Arch Deluxe, introduced in 1996, was not.The success or failure of a product in the market system is determined by

The term "laissez-faire" suggests that

The wants of consumers are expressed in the product market with "dollar votes."

Specialization-the division of labor-enhances productivity and efficiency by

Property rights give to some people the right to coerce others into giving up their property.Difficulty: 01 Easy Learning Objective: 02-02 List the main characteristics of the market system.Test Bank: II Topic: Characteristics of the Market System

The fundamental economic question regarding the distribution of output in the economy is equivalent to the question of who will produce the output.

Firms are motivated to minimize production costs because

In a market system, self-interest is the motivating force that

Which of the following is the main problem with the barter system of exchange?

The use of money for exchange and trade