Question 1

One of the characteristics of a modern market economy is an "active, but limited, government." How can the government "help" the economy?

Accepted Answer

The market is not always perfect.In some

Question 2

Assume that a firm can produce product A, product B, or product C with the resources it currently employs.These resources cost the firm a total of $100 per week, this cost is per resource.Assume, for the purposes of this problem, that the firm's costs cannot be changed.The market prices and the quantities of A, B, and C these resources can produce are given as follows.   
(a) Compute the firm's profit when it produces A, B, or C and enter these data in the table.
(b) Which product will the firm produce?
(c) If the price of A rose to $16, which product will the firm produce?
(d) If the firm produces A at a price of $16, what would tend to happen to the number of firms producing product A?

Accepted Answer

(a) Profit for A will be $40; for B will

Question 3

Why does specialization require a convenient means of exchanging goods?

Accepted Answer

As consumers, individuals prefer to have

Question 4

Explain the term "laissez-faire capitalism.

Accepted Answer

Pure capitalism is sometimes called "lai

Question 5

How does consumer choice differ from consumer sovereignty in a market system?

Accepted Answer

Consumer choice by itself refers only to

Question 6

Assume that a firm finds that its profits will be maximized (or losses minimized) when it produces $30 worth of product X.Each of these techniques shown in the following table will produce exactly $30 worth of X.   (a) Which method is most efficient? Why?
(b) Given the above prices, will the firm adopt a new method, which involves 10 units of land, 3 of labour, 2 of capital, and 2 of entrepreneurial ability?
(c) Suppose the price of capital falls to $1 without any other prices changing.Which of the methods will the firm now choose? Why?

Accepted Answer

(a) Method #1 is most efficient because

Question 7

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

Accepted Answer

The most important consequence of legall

Question 8

How can technological advance result in creative destruction?

Accepted Answer

Rival firms must follow the lead of inno

Question 9

Describe three ways that the division of labour contributes to society's output.

Accepted Answer

First, specialization lets people take a

Question 10

Explain the importance of self-interest in the operation of a market system.

Accepted Answer

Self-interest is the motivating force be

Question 11

List and describe the three main categories of businesses?

Accepted Answer

Businesses fall into three main categori

Question 12

Explain what is meant by a command economy.

Accepted Answer

The command economy is the opposite extr

Question 13

What is the importance of competition in relation to self-interest in a market system?

Accepted Answer

Competition is important as the force, w

Question 14

"Competition is the mechanism that brings order out of potential chaos in a price-directed economy." Explain.

Accepted Answer

This is true in the absence of governmen

Question 15

Describe two types of specialization in production.

Accepted Answer

Specialization may be of the human form

Question 16

Describe the basic features of the circular flow model.

Accepted Answer

In the simple circular flow model, there

Question 17

What is money and what important function does it perform? Explain how it overcomes the disadvantages associated with barter.What conditions are necessary for people to accept paper currency in exchange for the goods and services, which they sell?

Accepted Answer

Money is anything that is generally acce

Question 18

Respond to the following question: "Producing capital goods takes time, so how can that be a more efficient form of production of consumer goods?"

Accepted Answer

The production of capital goods does req

Question 19

Explain why the market system is an organizing mechanism.

Accepted Answer

Markets and price give the economic syst

Question 20

Explain the most important consequence of legally enforceable property rights?

Accepted Answer

The most important consequence of legall

Exam 2: A: - The Market System and the Circular Flow

One of the characteristics of a modern market economy is an "active, but limited, government." How can the government "help" the economy?

Why does specialization require a convenient means of exchanging goods?

Explain the term "laissez-faire capitalism.

How does consumer choice differ from consumer sovereignty in a market system?

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

How can technological advance result in creative destruction?

Describe three ways that the division of labour contributes to society's output.

Explain the importance of self-interest in the operation of a market system.

List and describe the three main categories of businesses?

Explain what is meant by a command economy.

What is the importance of competition in relation to self-interest in a market system?

"Competition is the mechanism that brings order out of potential chaos in a price-directed economy." Explain.

Describe two types of specialization in production.

Describe the basic features of the circular flow model.

What is money and what important function does it perform? Explain how it overcomes the disadvantages associated with barter.What conditions are necessary for people to accept paper currency in exchange for the goods and services, which they sell?

Respond to the following question: "Producing capital goods takes time, so how can that be a more efficient form of production of consumer goods?"

Explain why the market system is an organizing mechanism.

Explain the most important consequence of legally enforceable property rights?

B: Limits, Alternatives, and Choices

A: - Limits, Alternatives, and Choices

B: The Market System and the Circular Flow

B: Demand, Supply, and Market Equilibrium

A: - Demand, Supply, and Market Equilibrium

B: Market Failures: Public Goods and Externalities

A: - Market Failures: Public Goods and Externalities

B: Governments Role and Government Failure

A: Governments Role and Government Failure

B: an Introduction to Macroeconomics

A: an Introduction to Macroeconomics

B: Measuring the Economys Output

A: Measuring the Economys Output

B: Economic Growth

A: Economic Growth

B: Business Cycles, Unemployment, and Inflation

A: Business Cycles, Unemployment, and Inflation

B: Basic Macroeconomic Relationships

A: Basic Macroeconomic Relationships

B: The Aggregate Expenditures Model

A: The Aggregate Expenditures Model

B: Aggregate Demand and Aggregate Supply

A: Aggregate Demand and Aggregate Supply

B: Fiscal Policy, Deficits, Surpluses, and Debt

A: Fiscal Policy, Deficits, Surpluses, and Debt

B: Money, Banking, and Money Creation

A: Money, Banking, and Money Creation

B: Interest Rates and Monetary Policy

A: Interest Rates and Monetary Policy

C: Financial Economics

A: Long-Run Macroeconomic Adjustments

B: Long-Run Macroeconomic Adjustments

A: International Trade

B: International Trade

A: The Balance of Payments and Exchange Rates

B: The Balance of Payments and Exchange Rates

The Economics of Developing Countries

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