How Market Economy Works

Question 0

A market economy will automatically produce the optimum quantity of every good or service at the lowest possible cost of what 4 conditions are met?

Answer 0

1. Adequate info
2. Competition
3. No externalities
4. No public goods

Question 1

What is consumer sovereignty?

Answer 1

“Consumer is King” - consumers determine what’s produced; businesses must cater to taste or they’ll go out of business.

Question 3

What do externalities refer to in regard to market economy?

Answer 3

When transaction between a buyer and seller affects innocent 3rd party e.g. If Bob bugs a product from Wal-Mart and wal-mart produced under conditions that harmed its workers.

Question 4

If there is a freeze in Florida, what do you think might happen to the supply curve of orange juice?

Answer 4

It would shift because there is not enough oranges to make orange juice, thus affecting the supply.