完 Week 2: Chapter 2 Review (2024)

삐약삐약

Key Terms: 1-6

Reviewing Main Ideas: 8-11

Critical Thinking: 14

Problem Solving Activity: 15

1.System that combines the free market with some government intervention

mixed economy

2.One's own personal gain

self- interest

3.The doctrine that states that government generally should not intervene in the marketplace

laissez faire

4.System in which the central government makes all decisions on the production and consumption of goods and services

command economy

5. The struggle among producers for the dollars of consumers

competition

6. System in which decisions on production and consumption of goods and services are based entirely on exchange, or trade

market economy

8. Think of a business in your local area. Describe its operation in terms of factor markets and product markets.

McDonalds produces food for people who visit the restaurant (product market). People buy goods from McDonalds, giving McDonalds their money which they them use for their business (factor market).

9. Explain how a factory assembly line is an example of specialization.

A factory assembly line is an example of specialization because by division of work, each person only works on things that they are specialized to work on. Also, an assembly line is designed to make only certain products, meaning that the company specializes in making specific things. An automobile assembly line only produces cars. They don't make refrigerators or computers too (with the exception of wartime...).

10. Why are there no pure free market economies in the world?

There are no pure free market economies in the world because a country's market also needs a limited degree of government intervention. Governments create laws for protecting property rights and enforcing contract rights, patents, etc. Without these kind of interventions, many people fear that some firms would dominate others in their industry and be able to charge consumers any price for their goods.

11. Compare the circular flow diagrams of a free market and a mixed economy. Describe how they differ, and why.

The free market has no or little governmet intervention, so in the diagram, the governmet doesn't exist and both monetary and physical flows work only with households and firms. But in a mixed economy, the government also can enter the circular flow of economic activity in many ways like collecting taxes and expenditures from both households and firms.

14. Analyzing Information Review the advantages and disadvantages of both free market economies and centrally planned economies. Assess the way each system values economic freedom and economic equity.

Free market economies have no or little goverment intervention, so households and firms control the economy, including market prices and regulations, by themselves. The free market system usually makes the economy efficient and brings economic growth, but if it becomes a pure free market, it can bring monopolies and unreasonable pricing too. These factors can bring severe economic depression.

In centrally planned economies, the government controls the entire economy. Both households and firms have to follow the government's strict rules and regulations and do not have any rights to act by themselves. This system usually doesn't work very well because it doesn't bring any innovation, but because the government controls everything, every citizen gets paid the same amount from the government; there is no distinction between rich and poor so social class stratification does not exist.

15. Suppose that you are opening a new music store in your town. What resources would you need from the factor market? What would you offer in the product market? How would the government affect your business?

At first, I would need new instruments and music that will fill my store. I would also have to hire people to work at my store. I would offer the music and instruments that I got from a company that produces instruments. Since I am buying a product from them, this interaction is part of the product market. I would then supply these instruments to my customers, or households (which is also product market). They would then come into my store and buy the goods I'm offering for money, giving me more money to invest in my business (factor market). If people did not buy my goods or invest in my company, it would not exist. The government would affect my business by making laws for the minimum wage of employees, collecting taxes from my business, imposing a sales tax, etc. .