Chapter 3

Question 1

consumer sovereignty

Answer 1

consumers vote with their dollars in a market economy this accounts for what produced

Question 2

command economy

Answer 2

economy in which the government uses central planning to coordinate most economic activities

Question 3

market economy

Answer 3

an economy that allocates goods and services through the private decisions of consumers, input suppliers, and firms

Question 4

mixed economy

Answer 4

an economy where government and the private sector determine the allocation of resources

Question 5

labor intensive

Answer 5

production that uses a large amount of labor

Question 6

capital intensive

Answer 6

production that uses a large amount of capital

Question 7

product markets

Answer 7

markets where households are buyers and firms are sellers of goods and services

Question 8

factors or input markets

Answer 8

markets where households sell the use of their inputs to firms

Question 9

simple circular flow model

Answer 9

an illustration of the continuous flow of goods, services, inputs, and payments between firms and households

Question 10

production possibilities curve

Answer 10

the potential total output combinations of any two goods for an economy

Question 11

increasing opportunity cost

Answer 11

the opportunity cost of producing additional units of a good rises as society produces more of that good