s Respond to each of the following questions with a short answer (no more than 10 words).

Each
question is worth 5 points for a maximum of 40 points.
Question 1
Needs Grading

State the three main forms of production ownership by individuals outlined by Adam Smith:

Answer

Selected Answer: capital
labor
natural resurce

Question 2
Needs Grading

According to the text, who or which group sets market prices in a competitive capitalistic
market?

Answer

Selected
Answer:
ccording to Adam Smith, it is the consumer who makes all of these choices, and
it is because of this that the market system is self sufficient, self regulating, and
self correcting

Question 3
Needs Grading

According to the text, which of the following is not a suggested possibility for reducing
operating costs and thereby maximize profit?
Outsource the production of goods to markets with lower wages for workers.
Employ technological and human relation skills.
Maximize production efficiency.
Operate at level of almost zero waste.


Answer
Selected
Answer:
Outsource the production of goods to markets with lower wages
for workers.

Question 4
Needs Grading

The type of relationship between changes in price and changes in demand is best referred to
as a(n) __________________________:

Answer

Selected Answer: The law of demand.

Question 5
Needs Grading

Review the following statements and state which of them is directly implied by the concept of
equilibrium price in a market economy.
The market system has the capacity to self-correct.
Consumers must not pay above the minimum price of a commodity.
Producers can reduce cost of supplies and increase prices to maximize profit.
Consumers and producers must agree on the cost of a product before the product reaches
the market.
Demand must always be equal to supply of goods.

Answer

Selected Answer: The market system has the capacity to self-correct

Question 6
Needs Grading

Which type of graph or curve can best be utilized for determining the maximum combination
of goods, given that all resources are fully employed?

Answer

Selected Answer: Production possibilities curve.

Question 7
Needs Grading

According to the text, the economic system that is characterized by mass purchasing, buyouts
and takeovers of small retailers and consolidation of departmental stores is known as
what?

Answer

Selected Answer: Oligopolistic system

Question 8
Needs Grading

Review the following elements of a market economy. According to the text, technological
innovation relies on all these policies except:
The productive wealth that is invested in new products and services.
The scientific capabilities of society.
Societys educational system.
New methodologies and processes.
Stricter control of marketing policies.

Answer

Selected Answer: Stricter control of marketing policies.