According to Smith, when private individuals are left free to seek their own interests in free markets, they will inevitably be led to further the public welfare by an “invisible hand.” True False
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According to Smith, when private individuals are left free to seek their own interests in free markets, they will inevitably be led to further the public welfare by an “invisible hand.”
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- According to the invisible hand concept, the best way for a society to encourage the creation of jobs and the production of the products most wanted by consumers would be to: A) Permit government owned industries, such as telecommunications, transportation, and energy, and operate these firms as nonprofit organizations. B) Allow private ownership of businesses, but make use of extensive regulation to force businesses to behave in a socially desirable way. C) Allow entrepreneurs personal freedom to follow their own self-interest. D) Impose high taxes on individuals, and use the revenue to subsidize businesses to encourage them to produce the maximum rate of output.One popular way governments try to ameliorate market failures is by imposing taxes or offering subsidies. These policies change prices of goods and services so that individuals ___________ the _________ environmental effects of their production and consumption decisions. Fill in the gaps above.Explain briefly why the people and firms operating within a command economy would in all cases be less free than the people and firms operating within a capitalist economy.
- Which kind of market do you think is better for the development of an economy? Market Intervention or free market? Prove your argument by providing material like the difference between the two, the advantages and disadvantages to the economy etcThe creation of knowledge is a public good. Because knowledge is a public good, profit-seeking firms tend to free-ride on the knowledge created by others and, as a result, devote too few resources to the creation of knowledge. How does the U.S. government correct for this apparent market failure?The government uses several tools to implement environmental regulation. For example, mandatory production standards are designed to prevent companies from damaging a public good such as air or water. Emission taxes that create financial incentives for industries to reduce known pollutants, for example, from oil and coal production, are used to reduce negative externalities. The government can also force a company that causes an environmental problem to clean it up, thus solving the free rider problem. Nevertheless, government regulation imposes costs on society: Higher production costs due to regulation may be passed on to households in the form of higher prices, which—if large enough—can harm the economy. Legislation and its enforcement increase the size and cost of government. What type of analysis does government engage in to protect public goods? Explain using economic terms. What is government goal?
- Based upon those notions of self-interest and public interest and the bringing of both into harmony, according to Adam Smith, how would a market economy accomplish that harmony about which he describes? What is government's place in that market economy?For each of the following, indicate whether the statement is True, False, or Uncertain, and explain your answer. (No credit will be given without an explanation.) In the exchange problem, it is inefficient to give everything to one person. In the Lindahl mechanism, everyone pays the same price for a public good. The socially efficient solution is to not produce any externality.Who are the mercantilists? What policies did they advocate and how did they expect these policies to be achieved?Explain the problems associated with their policies.
- A country (Country X) that only produces two goods (good A) and (good B) in a closed market with another country (Country Y) that only produces the same two goods. Country X has 1000 workers and Country Y has 4000 and no workers can migrate. It takes Country X 2 workers to produce good A and 3 workers to produce good B whereas it takes Country Y 3 workers to produce good A and 1 worker to produce good B. Labour is the only factor of production and both follow a standard Ricardian model that has an identical utility function. Country X decides to adopt an import substitution strategy to improve the efficiency of productivity of good B. Explain what this means and provide an opinion on this strategy?Karl Marx offers the most critical view of modern private property and free market institutions. Marx claims that free-market capitalism necessarily produces: Extremes of inefficiencyExtremes of efficiencyExtremes of equality Extremes of inequalityThink of, for example, the police force that protects property rights, market regulators that ensure fair competition, monetary authorities that monitor a sound currency, or an impartial judiciary that enforces business contracts. Each, as an agent of the state, safeguards economic freedom. Hence, economic freedom does not exist ___________ (independently OR interactively) of the state. Rather, it is both _____________ (protected OR threatened) and _________________ ( liberated OR regulated) by the state.
