Economics Basics: Firms, Government, and Markets

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17 Questions

What is the role of households in the resource market?

They supply resources to the government

In the product market, what is the role of firms?

They supply goods and services to households

What is the primary source of finance for the government?

Households and firms paying taxes

What is the role of the government in the product market?

It supplies goods and services to households

What is the interaction between firms and households in the product market?

Firms supply goods and services to households

What is the primary function of resource markets?

To facilitate the exchange of resources

In the circular flow model, what is represented by the double-lined directed arrows?

Flow of real items

What is the primary role of the government in the economy?

To control or influence households, firms, and markets

What do firms pay to resource suppliers in the resource market?

Cost of production

In the three-sector circular flow model, what is the third sector that is added to the simple model?

Government

What is the outcome of firms combining resources and producing goods and services?

Supply of goods and services

What is the primary mechanism of economic coordination in a pure capitalist system?

Market mechanisms

What is a major disadvantage of a pure capitalist system?

Market failure

What is the primary role of the government in a command economy?

To coordinate and direct economic activities through a central planning committee

What is the main function of a firm in a mixed economy?

To use economic resources to produce goods and services

What is the main role of households in a mixed economy?

To make decisions on selling resources and buying goods and services

How many decision-making units are typically present in a closed economy?

3

Learn about the basics of economics, including the roles of firms and government, and how they interact in markets. Understand the concept of public goods and services, and the circular flow of economic activities.

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