Which of the following is a distinguishing feature of a command system
Central Planning
Which of the following is a distinguishing feature of laissez-faire capitalism
minimal government intervention
The French term 'laissez-faire" means:
let it be
Economic systems differ according to which two main characteristics?
who owns the factors of production and the methods used to coordinate economic activity
Which of the following is not a typical characteristic of a market system
government ownership of most property resources
Which of the following is a fundamental characteristics of the market system
Property Rights
Broadly defined, competition involves:
independently acting buyers and sellers and freedom to enter or leave markets
Market failure is said to occur whenever:
private markets do not allocate resources in the most economically desirable way
What are the examples of market failure?
Negative externalities
Positive externalities
Public goods
The two main characteristics of a public good are:
non rivalry and nonexcludability
A public good
is available to all and cannot be denied to anyone
A positive externality or spillover benefit occurs when
the benefits associated with a product exceed those accruing to people who consume it
(Last Word) in a cap-and trade program
government fixes the maximum amount of a pollutant that firms can discharge and issues permits that firms can buy from and sell to each other
True or False
(Consider This) The principle that private negotiation can resolve potential externalities without resort to government intervention is known as the Coase theorem
TRUE
In a market system scarce goods are allocated through the operation of
Market prices that are determined by consumers and producers acting in their own self-interest
In a command economy scarce goods are allocated by
a government-appointed planning board based on the board's long-term priorities
The phrase "invisible hand" means that
market prices provide information to consumers regarding products the wish to purchase, and to producers regarding products they wish to produce.
Economists say competitive markets are efficient because
by producing up to the point where MB = MC, profits are maximized and the maximum potential consumer surplus and producer surplus is generated
A public good is:
nonrival and nonexcludable
Public goods are not privately provided because
when goods are nonrival those people purchasing the good could simply allow others use without requiring compensation
The free-rider problem occurs when
people benefit from the public good without contributing to the cost
When negative externalities exist at a market,
equilibrium output will be greater than the efficient output.
The government could correct the difference between the equilibrium output level and the efficient output level by
using a regulation that requires firms to internalize the external costs
An example of and external benefit is
safety provided by motion detector lights
Examples of command economies are:
Cuba and North Korea
An economic system
is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem
Property rights are important because they
encourage cooperation by improving the chances of mutually agreeable transactions
If competitive industry Z is making a substantial economic profit, output will
expand in industry Z as more resources will move to that industry
Economic profits and losses
are essential to the reallocation of resources from less desired to more desired goods
The incentive problem under communist central planning refers to the idea that
workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products
(Last Word) According to economist Donald Boudreaux
private property eliminates the possibility that resource arrangements will be random
From society's point of view the economic function of profits and losses is to
reallocate resources from less desired to more desired uses
If competitive industry Y is incurring substantial losses, output will.
contract as resources move away from industry Y
In a market economy, the distribution of output will be determined primarily by
the quantities and prices of the resource that households supply