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Govt 350 Exam 2 Ferdon.
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Govt 350 Exam 2 FerdonWhat represents the dynamics of the free market system? - ANS-Competition as
opposed to coercive interference
Be able to discuss 2 consequences of competition - ANS-·1)People are at liberty to
gravitate towards what they do best if the goal of any free market procedure is
productivity and productive employment.
2) Results in more efficient use of capital and labor. (Stewardship)
3)Raises or elevates the quality of products.
4)Overcomes scarcity by increasing the availability of goods and services.
5)Results in production sufficient to meet consumer demands.
6)Lowers the price of products; scarce monetary resources are distributed to other
market sectors.
7) Enhances cooperation through constant interaction and exchange. Consumers
compete against consumers, producers against producers. (Requires relationship!)
8) Results in overall economic improvement nationally.
What is the relationship between competition and scarcity? - ANS-Competition is a
consequence of economic scarcity: Competition exists when people prize or value
something which is not readily available. Increases occur on the demand side when the
supply is low, or a relative scarcity exists. More producers are now drawn into the
market to meet the demand. Scarcity is overcome when supply meets demand.
What is "proit" and it's relationship to the market system? - ANS-Profit is the incentive
for investment, and rewards result in greater incentives to produce. Objective of the
market system is increased production, and competition promotes productivity;
nevertheless, people are free to lose.
o Profit actually guides the factors of production in accordance with demand.
o Profits will solve a shortage very quickly, provoke greater levels of economic
efficiency, and therefore, a more efficient use of property.
o Profits are not generally a result of raising prices, but greater levels of production
efficiency which result from cuts in the cost of production.
o
o Profits are calculated by relating costs to prices.
#6 Capitalism fosters greed and government must temper it - ANS--"Greed" is over
applied here
-Acting in your own self interest is not necessarily a bad thing
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