Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 2, Problem 1DQ
To determine
The market system and command economy that cope with economic scarcity.
Expert Solution & Answer
Explanation of Solution
The market system is a system, which allows private ownership of the capital and its resources. The owners of the resources and the capital decide the economic scarcity questions such as what to produce, how to produce and to whom to produce. The economic activity in the market system works on the basis of market prices, which are decided by the interaction of the demand and supply in the market. The main objective of the market economy is profit maximization. The self interest based on the profit decides the level of output which is produced and the level of resources which is supplied in the economy.
The command economy is a system in which, there is only public ownership. The resources are owned and operated by the public authority and basically government. There is no profit motive in the economy. The decisions such as what to produce and how to produce etc are taken on the basis of priorities that are given by the government authorized planning commission. The decision for allocating capital, labor and other such decisions are taken based on the priorities of the board.
Economics Concept Introduction
Concept introduction:
Market System: The market system is a system in which, the economy is operated by the private owners of a capital and the economic decisions are taken by the capital owners.
Command Economy: The command economy is a system in which, the economy is controlled by public planning and there is public ownership in the economy.
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Students have asked these similar questions
With current technology, suppose a firm is producing 400 loaves of banana bread daily. Also, assume that the least-cost combination of resources in producing those loaves is 5 units of labor, 7 units of land, 2 units of capital, and 1 unit of entrepreneurial ability, selling at prices of $40, $60, $60, and $20, respectively. If the firm can sell these 400 loaves at $2 per unit, will it continue to produce banana bread? If this firm’s situation is typical for the other makers of banana bread, will resources flow to or away from this bakery good?
Suppose that three volunteers are preparingcookies and cupcakes for a bake sale. Diana canmake 27 cookies or 18 cupcakes per hour; Andycan make 25 cookies or 17 cupcakes; and Sam canmake 10 cookies or 12 cupcakes. [ LO 2.2]a. Who has the absolute advantage at makingcookies?b. At making cupcakes?
The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons.
Gamma's production possibilities
A
B
C
D
E
Tea
120
90
60
30
0
Pots
0
30
60
90
120
Sigma's production possibilities
A
B
C
D
E
Tea
40
30
20
10
0
Pots
0
30
60
90
120
What are the limits of the terms of trade between Gamma and Sigma?
Multiple Choice
1 tea = 2 pots to 1 tea = 6 pots
1 tea = 3 pots to 1 tea = 6 pots
1 tea = 2 pots to 1 tea = 3.5 pots
1 tea = 1 pot to 1 tea = 3 pots
Chapter 2 Solutions
Economics (Irwin Economics)
Ch. 2.2 - Prob. 1QQCh. 2.2 - Prob. 2QQCh. 2.2 - Prob. 3QQCh. 2.2 - Prob. 4QQCh. 2 - Prob. 1DQCh. 2 - Prob. 2DQCh. 2 - Prob. 3DQCh. 2 - Prob. 4DQCh. 2 - Prob. 5DQCh. 2 - Prob. 6DQ
Ch. 2 - Prob. 7DQCh. 2 - Prob. 8DQCh. 2 - Prob. 9DQCh. 2 - Prob. 10DQCh. 2 - Prob. 11DQCh. 2 - Prob. 12DQCh. 2 - Prob. 13DQCh. 2 - Prob. 1RQCh. 2 - Prob. 2RQCh. 2 - Prob. 3RQCh. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - Prob. 6RQCh. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4P
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