Exam 2: The Market System and the Circular Flow

In analyzing a market system, economists often assume that firms will choose the production techniques that will give them the maximum revenues.Difficulty: 02 Medium Learning Objective: 02-03 Explain how the market system answers the five fundamental questions of what to produce, how to produce, who obtains the output, how to adjust to change, and how to promote progress.Test Bank: II Topic: Five Fundamental Questions

Most market economies, such as the U.S.and the U.K., allow government policies and actions aimed at promoting economic growth and stability.

International specialization and trade

The French term "laissez-faire" means

One major element of the command system is

(Consider This) Since World War II,

By freedom of enterprise, we mean that individual

Private property and freedom of choice in a market system have the following implications, except

Which is one of the five fundamental questions that need to be dealt with in any economic system?

In a market system, which of the following is a major benefit of making the firm's owners and investors exclusively shoulder the business risk?

In a command economy like the old Soviet Union, one is able to improve one's lot and get ahead in society largely through

Property rights are important because they

"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

If competitive industry Z is making substantial economic profit, output will

Laissez-faire capitalism limits the government's economic functions to the following, except

In a market system, the distribution of goods and services largely depends on the distribution of income and people's preferences.

The distribution of income in a market system is a primary factor that resolves which of the following fundamental economic questions?

In terms of the circular flow diagram, households make expenditures in the market and receive income through the market.

From society's point of view, the economic function of profits and losses is to

The market economy is regarded as "efficient" in that