Chapter 2 Macroeconomics Homework

Chapter 2 _______is the use of resources by an individual, firm, region, or nation to produce one or a few goods or services rather than the entire range of goods and services. Specialization Which of the following collectively direct resources to industries that are meeting consumer wants and away from industries that are not meeting consumer wants? Consumer sovereignty Dollar votes Money performs several functions, but first and foremost it is a _______ Medium of exchange Goods and services are produced efficiently when production is organized in combinations and ways ____. That minimize the cost per unit of output Modern market economics usually have a(n)____. Active but limited government In a market economy, goods and services are distributed ____. To consumers on the basis of their ability and willingness to pay the existing market price The five questions that every society must address reflect the reality of ______ (scarce/infinite) resources in a world of _______ (limited/unlimited) wants. Scarce, unlimited If increasing numbers of consumers decide to purchase organically farmed fruit rather than conventionally farmed fruit, how is the market likely to respond? Conventional fruit profits will fall Organic fruit profits will rise Which of the following correctly state the importance of advanced technology and capital goods? The new technology can enhance the productivity of workers The most direct methods of producing a good or service are often the least efficient True or False: In a market system, consumers exercise consumer sovereignty, which is crucial in determining the types and quantities of goods produced. True The creation of new products and production methods that completely destroys the market positions of firms that are wedded to existing products and older ways of doing business is called _____. Creative destruction Which of the following best describe how goods and services should be produced? By locating production facilities optimally to hold down production and transportation expenses By utilizing the right mix of labor and capital The “invisible hand” guides firms and resource suppliers to promote ______ even as they seek to further their own interests. Public or social interests Which of the following statements describe who will get the goods and services produced in a market economy? Those who are willing and able to pay for the goods and services Those who have sufficient income and want to spend money on a particular good Which of the following were economic problems faced by the former Soviet Union, Eastern Europe, and China prior to its market reforms? Incentive Problem Coordination Problem Which of the following would be an example of the system accommodating change? Buyers want more juice and less milk. Producers increase spending only on juice. In the circular flow model, the market economy creates _____. Continuous flows of goods and services, resources, and money Which of the following is the most efficient method of production? Using a combination of labor, capital and technology In a circular flow model, households ______ resources and _______ products. Sell, buy In recent years, new MP3 and digital technologies have replaced compact disks. This is an example of _______. Creative Destruction A business owned and managed by a single person is called a(n) _________. Sole proprietorship Technological advancements, such as the personal computer and medical discoveries, are primarily driven by the profit motive. However, such advancements eventually promote the public or social interest as though they are guided by _____. Invisible Hand Which of the following are found in the product market? Goods Services Which of the following occurs in the resource market? Households provide economic resources directly as workers or entrepreneurs Businesses buy resources from households because they are necessary for producing goods and services Households sell resources and businesses buy them. Which of the following are components of the circular flow model? Product market Businesses Resource market Households How does the market system develop methods for analyzing and managing risk? By presenting businesses with the economic consequences of their decisions In the circular flow model, households sell resources to and buy products from ______. Businesses Which statements about the profit system are true? It encourages entrepreneurs to make prudent decisions It is actually a profit and loss system In a circular flow model _____. Households spend their income in the product market In a market system, firm ________ are subject to business risk. Owners True or false: The resource market the place where resources or the services of households are produced. False The two major benefits that arise from the market system's restriction of business risk to owners and investors are Attracting inputs and focusing attention For a market system to maximize its potential, it must develop methods for ______. Assessing and managing risk How does the profit system guide entrepreneurs? By rewarding them with profits when they choose wisely By punishing them with losses when they choose poorly A firm’s owners are called _____ because they are only paid after employees, suppliers, and lenders have been paid. Residual claimants The market system attracts inputs and focuses owners’ attention on risk management by restricting business risk to which two groups? Owners Investors Which of the following ensures that entrepreneurs and private businesses are free to obtain and use economic resources to produce their choice of goods and services? Freedom of Entrepreneurs The goods and services produced by an economic unit through ______ can be exchanged for a full range of desired products produced by other economic units. Specialization In a _______ system, people act in their own self-interest. Market True/False: Money complicates exchange or trade. False Two or more buyers and two or more sellers acting independently in a particular product market with the freedom to enter and leave the market best describes _____. Competition AN active, but limited, government is a characteristic of which type of economic system in modern advanced industrial economics? Modern Market System What is the coordinating mechanism in a market system? Prices Identify the five fundamental questions that all economies, whether market or command, must address. Who will get the goods and services? How will the goods and services be produced? How will the system promote progress? How will the system accommodate change? What goods and services will be produced?