Problem 1
Contrast how a market system and a command economy try to cope with economic scarcity.
Problem 2
How does self-interest help achieve society's economic goals? Why is there such a wide variety of desired goods and services in a market system? In what way are entrepreneurs and businesses at the helm of the economy but commanded by consumers?
Problem 3
Why is private property, and the protection of property rights, so critical to the success of the market system? How do property rights encourage cooperation?
Problem 4
What are the advantages of using capital in the production process? What is meant by the term "division of labor"? What are the advantages of specialization in the use of human and material resources? Explain why exchange is the necessary consequence of specialization.
Problem 5
What problem does barter entail? Indicate the economic significance of money as a medium of exchange. What is meant by the statement "We want money only to part with it"?
Problem 6
Evaluate and explain the following statements: a. The market system is a profit-and-loss system. b. Competition is the disciplinarian of the market economy.
Problem 7
Some large hardware stores, such as Home Depot, boast of carrying as many as 20,000 different products in each store. What motivated the producers of those individual products to make them and offer them for sale? How did the producers decide on the best combinations of resources to use? Who made those resources available, and why? Who decides whether these particular hardware products should continue to be produced and offered for sale?
Problem 8
What is meant by the term "creative destruction"? How does the emergence of MP3 (or iPod) technology relate to this idea?
Problem 9
In a sentence, describe the meaning of the phrase "invisible hand."
Problem 10
In market economies, firms rarely worry about the availability of inputs to produce their products, whereas in command economies input availability is a constant concern. Why the difference?
