FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

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

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 1

Essay

Review LaterAdd Note

Review Later

What roles do freedom of enterprise and freedom of choice play in capitalism? How important are they to the operation of a competitive market economy?

Correct Answer

verified

In capitalism, two essential freedoms ar...

View Answer

Show Answer

Question 2

Essay

Review LaterAdd Note

Review Later

What are the economic advantages of the division of labour?

Correct Answer

verified

Specialization enables individuals to ta...

View Answer

Show Answer

Question 3

Essay

Review LaterAdd Note

What is the relationship between businesses and households in the circular flow model?

How does the market system accommodate change in consumer's preferences?

How does the use of money differ from the use of barter in the exchange of goods and services?

What conditions are necessary for economic competition to exist?

Assume that a firm finds that its profits will be maximized (or losses minimized) when it produces $50 worth of product X.Each of these techniques shown in the following table will produce exactly $50 worth of X. (a) Which method is most efficient? Why? (b) Given the above prices, will the firm adopt a new method, which involves 2 units of land, 2 of labour, 4 of capital, and 8 of entrepreneurial ability? (c) Suppose the price of labour falls to $1 without any other prices changing.Which of the methods will the firm now choose? Why?

"Every economy is based on 'planning' of one sort or another." Interpret and explain.

List two problems that have contributed to the decline of command systems on a national scale.

Explain the two different motives that firms have for choosing the lowest-cost production methods to produce goods and services?

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 below. (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) Suppose the quantity of product B the firm was able to produce with the same amount of inputs now rose to 25.Which product will the firm now produce? (d) As a result of the rise in quantity of product B to 25 that each firm can produce, what will happen to the number of firms producing product B?

Describe the three major virtues of a market system.

Provide examples of prominent Canadian corporations and describe the unique implications that arise due to the fact that such corporations are independent legal entities?

Describe all the advantages a money economy has over a barter economy?

Suppose Tom, Dick, and Harry live in a barter economy.Tom produces wine, Dick bakes bread, and Harry makes cheese.Tom wants some bread to go with his wine and is willing to trade 1 litre of wine for two loaves of bread.Dick wants some cheese to go with his bread and is willing to trade one loaf of bread for one-half kilogram of cheese.Harry doesn't want bread, but wants some wine to go with his cheese and is willing to trade cheese for one litre of wine.It is not possible for all three of them to meet together at one time.(a) Explain how this situation illustrates the difficulty with a barter economy.(b) Devise a money system using rubies where four rubies are equivalent in value to one litre of wine.In other words tell how much bread and cheese would be worth in terms of rubies in this economy.In this system, how much cheese must Harry sell in order to buy one litre of wine?

In the below circular flow diagram, the household and business sectors are labelled with arrows representing the flows of income and output labelled (a) through (f) and the two appropriate markets labelled (g) and (h).Supply the correct descriptive titles for each of these labels (a) through (h).

Why is the consumer the king (or queen) in a market system?

What factors determine who will get the output?

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

List nine characteristics of the market system.