Exam 2: The Market System and the Circular Flow

Competition means that

Payments that a firm makes to obtain needed resources comprise its

In terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.

Property rights give the government the right to own, use, and dispose of resources in an economy.

Adam Smith in his 1776 book the Wealth of Nations describes the concept of "an invisible hand." Explain what he means by an "invisible hand."

Which of the following is a fundamental characteristic of the market system?

Why is the right of private property an essential characteristic of a market system?

Anything that is generally acceptable in trading for goods and services is a

Economic systems differ from one another based on who owns the factors of production and

The incentive problem under communist central planning refers to the idea that

Which of the following is a distinguishing feature of a command system?

Which of the following is not one of the five fundamental questions that an economy must deal with?

In a market system, the income earned by owners of natural resources is called interest income.

In a market system, the "What will be produced?" question is ultimately decided by

Central planning in the Soviet Union and pre-reform China emphasized expanding the production of consumer goods to raise the domestic standard of living.

What are the Five Fundamental Questions that every economy must answer?

In a market system, a firm's employees are typically shielded from business risk by

The economies of North Korea and Cuba are

Consumers express self-interest when they

By freedom of enterprise, we mean that individual