Chapter 2 Flashcards
What is the struggle among various producers for the consumer’s business called?
Competition
What is the function of an economic system?
To produce and distribute goods and services.
What does the process of specialization do for an economy?
It makes it more efficient.
Collective in the Soviet Union were inefficient producers of agricultural products. Why?
Farm workers had guaranteed incomes, so they had few incentives to produce more or better crops.
Who was a free market philosopher?
Adam Smith
How could the Chinese economy be characterized?
Mixed, but on the side of centrally planned.
What is one of the most important advantages of a free market?
It encourages growth.
Who was the leader that introduced communism and central planning to the former Soviet Union?
Vladimir Lenin
What might be a hardship for citizens of a centrally planned economy making a transition to a market-based system?
Workers would lose job security and guaranteed incomes.
Why do markets exist?
Markets allow people to buy what they need to consume and sell the specialized goods and services they produce.
Why does even a free market economy need some government intervention?
To provide for things that the marketplace does not address.
In what kind of an economy does the government make all the decisions?
Centrally planned
Economy in which children tend to have the same jobs their parents did.
Traditional economy
The market in which households purchase the goods and services that firms produce.
Product market
You are an entrepreneur with an innovative idea for a new business. In which kind if economy would you have the most opportunity to try to achieve success?
Market economy
Suppose there is a family in which all the boys are expected to become farmers when they are adults, just as their fathers and grandfathers did. What kind of economy do they participate in?
Traditional economy
What does a government provide as part of a safety net for the people?
Unemployment compensation
The economy of China is in transition. What does this mean?
The economy is moving from central planning toward a market-based system.
What goal is difficult to achieve in a pure free market system?
Economic equity
What incentive motivates a manufacturer to sell a product?
Making profits in sales
A person believes that real equality can only exist when political equality is coupled with economic equality. This person believes that democratic means should be used to distribute wealth evenly throughout society. What is this person?
A socialist.
What incentive do manufacturers have to sell their products?
Making profits on sales
What is the purpose of competition?
To act as a regulating force in the marketplace.
What is an important advantage of the free market?
It offers a wide variety of goods and services.
How would the economy of Canada be likely to be characterized?
Mixed, but on the side of free market.
