Chapter Questions
In a market economy, what is the central coordinating mechanism?
In a centrally planned socialist economy, what is the central coordinating mechanism?
How does a market economy solve the what, how, and for whom to produce problems?
How does a centrally planned socialist economy solve the what, how, and for whom to produce problems?
Is capitalism or socialism the better economic system? Why?
Why does an economy's strength ultimately reside in its people?
Why is entrepreneurship a central part of any business?
You're starting a software company in which you plan to sell software to your fellow students. What form of business organization would you choose? Why?
What are the two largest categories of state and local government expenditures?
What are the six roles of government listed in the text?
Say the government establishes rights to pollute so that without a pollution permit you aren't allowed to emit pollutants into the air, water, or soil. Firms are allowed to buy and sell these rights. In what way will this correct for an externality?
Give an example of a merit good, a demerit good, a public good, and a good that involves an externality.
Name two international organizations that countries have developed to coordinate economic actions.
What are two organizations that countries can use to coordinate economic relations and reduce trade barriers?
Why are international organizations limited in their effectiveness?