2.9 Market economic system

Which is not a basic principle of a market system

• competition

• voluntary exchange

• socialism

• self-interest

Which of the following does not follow with the basic principles of market systems?

• People are driven by their desire to make a profit

• competition is discouraged

• people feel best when they freely trade for what they want

• innovation is encouraged

Private property rights

• Should not be enforced by the government

• Are protected by the government

• Do not exist in capitalist markets

• Are optional for success in the market

The law of demand states

• when prices rise, the amount people will buy will rise
• when prices rise, the amount people will buy will decrease
• when prices rise, the amount people will sell will rise
• when prices rise, the amount people will sell will decrease

The law of supply states

• When prices rise, producers will want to produce more
• When prices rise, producers will want to produce less
• When producers producer more, they expect to make less money
• When producers producer less they expect to make more money

Equilibrium is

• The point at which there is a shortage of a good or service
• The point at which there is surplus of a good or service
• The point at which the amount people are buying at a certain price is equal to that which people are selling
• The point at which people are buying are as high as possible and the sellers are selling for equal prices so there is choice

What do businesses generally do when demand for a product decreases?

• Decrease the price

• Increase the price

• Keep the price the same

• Produce more

According to the principles of supply and demand, if the price of Coke rises we would expect that

• People will buy more Coke
• Producers will produce less Coke
• People will buy more Pepsi
• Producers will produce less Pepsi

If the cost of labor to make steel increases, according to the laws of supply and demand the supply for steel would

• increase
• decrease
• stay the same but demand would increase
• stay the same but demand would decrease

In a free market, one can expect a company to charge the highest possible prices they can to make the most money due to

• Competition

• Voluntary exchange

• The Profit motive

• The existence of Private property