The Market System and the Circular Flow

Which of the following best describes a command system?

Which characteristic of a market system ensures that entrepreneurs and private businesses can obtain, use, and dispose of property resources as they see fit?

The market system's answer to the fundamental question 'What will be produced?' is essentially determined by which of the following?

In a market system, the fundamental question 'How will the goods and services be produced?' is answered by which principle?

According to the circular flow model, what role do households play in the resource market?

In the circular flow model, what is the role of businesses in the product market?

A firm producing bathroom soap can use one of three techniques. The price per unit of labor is $2, land is $1, capital is $3, and entrepreneurial ability is $3. If the firm uses Technique 3, which requires 1 unit of labor, 4 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, what is the total cost to produce $15 worth of soap?

Based on the data for three production techniques for soap, with labor costing $2 per unit, land $1, capital $3, and entrepreneurial ability $3, which technique is the most economically efficient?

Using the production data for soap where land is $1, capital is $3, and entrepreneurial ability is $3, what would happen if the price of labor fell from $2 to $0.50 per unit?

What is the primary contribution of the division of labor to a society's output?

What major problem associated with barter does the use of money overcome?

According to Adam Smith, how does the 'invisible hand' of the market system promote the public interest?

What was the 'coordination problem' that contributed to the failure of command systems?

In command economies, what was the 'incentive problem'?

What does 'freedom of choice' in a market system enable?

The concept of 'freedom of enterprise' in a market system means that:

What is the primary role of self-interest in a market system?

Broadly defined, competition in a market system requires which of the following conditions?

In the circular flow model, what is the difference between the 'real flow' and the 'money flow'?

In the 'Shuffling the Deck' analogy by Donald Boudreaux, what social institution is credited with encouraging the productive and non-random arrangement of the world's resources?

What is the concept of 'creative destruction'?

How does the market system primarily accommodate changes in consumer tastes?

In a market system, how does capital accumulation contribute to the promotion of progress?

A firm produces 400 loaves of banana bread daily using 5 units of labor at $40 per unit, 7 units of land at $60 per unit, 2 units of capital at $60 per unit, and 1 unit of entrepreneurial ability at $20 per unit. What is the firm's total cost of production?

A firm produces 400 loaves of banana bread which it sells for $2 per loaf. Its total cost of production, using 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, is $760. Will this firm continue to produce banana bread, and will resources flow to or away from this bakery good?

What is the defining characteristic of laissez-faire capitalism?

How does geographic specialization differ from human specialization (division of labor)?

Why does a system of barter pose serious problems for an economy?

In a market system, who ultimately gets the output of goods and services?

What do economists mean by the term 'dollar votes'?

What is the primary role of prices in a market system?

Besides the coordination and incentive problems, what was a key issue in command economies that stemmed from the use of quantitative production targets?

What fundamental economic difference does the 'Two Koreas' example illustrate?

In the resource market of the circular flow model, which of the following do households sell?

In the resource market of the circular flow model, the money that flows from businesses to households is paid as:

A firm must produce $40 worth of product A. Resource prices are: Labor $3, Land $4, Capital $2, and Entrepreneurial ability $2. Using Technique 1, which requires 5 units of labor, 2 of land, 2 of capital, and 4 of entrepreneurial ability, what is the firm's total cost?

A firm produces $40 worth of product A. Resource prices are: Labor $3, Land $4, Capital $2, and Entrepreneurial ability $2. It chooses the most efficient technique, which has a total cost of $34. What is the firm's economic profit or loss?

Why are advanced technology and capital goods considered important features of a market system?

Why is exchange a necessary consequence of specialization in an economy?

What is the economic definition of a market?

Consumer sovereignty is the idea that:

What is considered the basic regulatory force in the market system?

What is considered the primary organizing and coordinating mechanism of the market system?

In a market system, what do continuing economic profits in an industry signal?

The 'McHits and McMisses' example featuring McDonald's menu items illustrates what key economic concept?

The most economically efficient production technique depends on what two factors?

In a market system, the amount of income a household has to spend depends on what two factors?

If consumers decide they want more fruit juice and less milk, how does the market system redirect resources?

What are the three virtues of the market system that the chapter reemphasizes in its discussion of the 'invisible hand'?

The 'Last Word' section uses the analogy of shuffling a deck of 52 cards to explain the improbability of a useful, random arrangement of resources. What is the approximate number of different ways to arrange 52 items?