Exam 2: The Market System and the Circular Flow

Quantitative measures of managerial success, such as production targets or quotas, are highly foolproof and are thus ideal to use in raising economic efficiency.

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

The highly influential book by Adam Smith, who brought up the "invisible hand" notion, is titled

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

In a market economy, a significant change in consumers' desire for product X will

College graduates who dislike business risk will mostly seek to be hired by firms as labor, rather than starting their own firms as entrepreneurs.

Which of the following is true of an economy that operates entirely through central planning? A. An individual‘s success in business is based on political savvy rather than economic profitability. B. There is relative ease in matching resource allocation to consumer demand by the central planners. C. Central planners receive market information and coordinate economic activity through the price mechanism. D. The system adapts easily to technological change, because there is a healthy entrepreneurial spirit.

The "coincidence of wants" problem associated with barter refers to the fact that

Suppose a firm can produce 70 units of a product, Zenia, by combining labor, land, capital, and entrepreneurial ability, as in the four alternative techniques shown in the table below. Assume further that the firm can hire labor at $3 per unit, land at $3 per unit, capital at $6 per unit, and entrepreneurship at $9 per unit. Refer to the provided table. Which technique is the most economically efficient way of producing Zenia?

A corporation is a type of business firm where the debt of the firm is considered its owners' personal responsibility.

In the simple circular flow model,

Answer the question using the following data, which show all available techniques for producing 20 units of a particular commodity If a new production technique is developed that enables a firm to produce 20 units of output with 3 units of land, 3 of labor, 1 of capital, and 2 of entrepreneurial ability, this technique would

Examples of command economies are

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

"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

An economic system

Firms are motivated to minimize production costs because

When somebody buys an insurance policy, that person is seeking to transfer risk away from herself and pass it on to the insurance company.

Costs can be defined as total payments made to workers, landowners, and capital suppliers less payments to the entrepreneur for organizing and combining the other resources used to produce a good.

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that