Homework Introduction and Chapter 1

A  Income from the ownership of property generates more income than income from the sale of human capital.

B  The fact that ownership of physical capital generates more income that personal productive capacity is evidence that a market economy is fundamentally tilted to favor large corporations rather than private individuals.

C  Personal productive capacity generates income for people when people take a job and get paid wages.

D  None of the answers are correct.

E  Taxing wages because it encourages the accumulation of human capital will enhance the ability of the market to produce prosperity and freedom.

F  Taxing physcial capital, such as machinery and property, encourages the accumulation of physical capital and will enhance the ability of the market to produce prosperity and freedom.

A  redistrubutes income from one group to another.

B  in combination with profits firms make from producing and selling goods, leads to the low cost production of goods which are valued more highly than the cost of production.

C  is neccessary for a market econom to create prosperity.

D  Transmits information about what mix inputs should be used to produce goods and services.

E  Transmits information from consumers to producers about what good are more highly valued and, everything else equal, producuers should produce more of.

F  All of these

A  The invisible hand is god’s will manifesting itself in the day to day actions of men.
Adam Smith believes the Invisible Hand is an inferior method of coordinating economic activity.
The invisible hand guides individuals to act cooperatively in the production of goods and services efficiently and at low cost.

B  The invisble hand is a metaphor for the way in which people pursuing their own self interest as they define it can coordinate effectively economic activity.
The invisible hand guides individuals to act cooperatively in the production of goods and services efficiently and at low cost.
The invisible hand can control the mix of goods and services produced in an economy so only those services valued by people more than the cost of production are produced and those whose costs exceeds the value to individuals are not produced.

C  The invisible hand can control the mix of goods and services produced in an economy so only those services valued by people more than the cost of production are produced and those whose costs exceeds the value to individuals are not produced.
Adam Smith believes the Invisible Hand is an inferior method of coordinating economic activity.

D  The invisible hand is god’s will manifesting itself in the day to day actions of men.
Adam Smith believes the Invisible Hand is an inferior method of coordinating economic activity.

A  Friedman illustrates that government dictated prices can cause the “right” amount of a good to be produced.
The quadrupling of the price of oil in 1973 is an example of market forces setting prices.
Freely fluctauting prices cause a good to be produced in the cheapest and most efficient manner.

B  Freely fluctuating prices are better at transmitting information from consumers to producers that more of a good should be produced.
Freely fluctuating prices can coordinate productive activity better than commands from a central authority.
Freely fluctauting prices cause a good to be produced in the cheapest and most efficient manner.
Freely fluctuating prices determing who gets to consume a good and who does not.

C  Friedman illustrates that government dictated prices can cause the “right” amount of a good to be produced.
Freely fluctuating prices can coordinate productive activity better than commands from a central authority
Government price controls that prevented oil prices from rising in the U.S. due to the actions of OPEC, reduced U.S. dependence on foreign oil.

D  Friedman illustrates that government dictated prices can cause the “right” amount of a good to be produced.
The quadrupling of the price of oil in 1973 is an example of market forces setting prices.
Government price controls that prevented oil prices from rising in the U.S. due to the actions of OPEC, reduced U.S. dependence on foreign oil.

A  History has shown us that centrally controlled command economies promote prosperity and freedom.
Generally speaking, economies that rely on voluntary exchange have produced more prosperity and freedomg for its citizens than central controlled economies.

B  History has shown us that centrally controlled command economies promote prosperity and freedom.
The Soviet Union is and example of a centrally controlled command economy that produced prosperity and freedom for its citizens.

C  A neccesary condition for a system of voluntary exchange to be used to organize an economy is that prices be allowed to fluctuate according to supply and demand, i.e. no central authority interferes in people buying and selling in the market.
The Soviet Union is and example of a centrally controlled command economy that produced prosperity and freedom for its citizens.

D  Generally speaking, economies that rely on voluntary exchange have produced more prosperity and freedomg for its citizens than central controlled economies.
A neccesary condition for a system of voluntary exchange to be used to organize an economy is that prices be allowed to fluctuate according to supply and demand, i.e. no central authority interferes in people buying and selling in the market.

A  False

B  True

A  True

B  False

A  True

B  False

A  False

B  True