Mcconnell brue flynn macroeconomics 20e pdf free download

Connect is the only integrated learning system that empowers students by continuously adapting to deliver precisely what they need, when they need it, and how they need it, so that your class time is more engaging and effective. You are commenting using your WordPress. You are commenting using your Google account. You are commenting using your Twitter account. You are commenting using your Facebook account. Notify me of new comments via email.

Notify me of new posts via email. Menu Skip to content. Home About. Download PDF now! Share this: Twitter Facebook. Like this: Like Loading Leave a Reply Cancel reply Enter your comment here 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? LO2 Answer: The motive of self-interest gives direction and consistency to the economy. The primary driving force of the market system is self-interest. Entrepreneurs try to maximize their profits; property owners want the highest price for their resources; workers choose the job with the best wages, fringe benefits and working conditions. Consumers apportion their expenditures to maximize their utility, while seeking the lowest possible prices.

As individuals express their free choice, the economy is directed to produce the most wanted goods at the lowest possible cost. There is a wide variety because individual wants are diverse. To maximize profits, producers must respond to the desires of the individual consumer. Although producers are free to choose what products they will produce, if the producers are to maximize profits, these good and services must be what consumers desire.

All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 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? LO2 Answer: The ownership of private property and the protection of property rights encourages investment, innovation, and, therefore, economic growth. Property rights encourage the maintaining of the property and they facilitate the exchange of the property.

However, the most important consequence of property rights is that they encourage people to cooperate by helping to ensure that only mutually agreeable economic transactions take place. What are the advantages of using capital in the production process? What are the advantages of specialization in the use of human and material resources? Explain why exchange is the necessary consequence of specialization.

LO2 Answer: Capital goods enable producers to operate more efficiently and to produce more output. The advantages of specialization for workers are that they can choose work according to their natural aptitudes, have the opportunity to perfect those skills, and save time in not having to shift continually from one task to another. Material resources will be developed and adapted for a specific use.

On a regional basis, each region will produce those products for which it is best suited. By specializing in its comparative advantage, each region or set of human and material resources is being used to maximize efficiency.

When resources are specialized, they are no longer self-sufficient. To obtain the goods and services one needs, exchange is necessary. Also, specialization will result in a surplus of a specific good being produced. The surplus of one good will be exchanged for the surplus production of other goods. What problem does barter entail? Indicate the economic significance of money as a medium of exchange. With money as a medium of exchange, one knows the purchase price of the item to be purchased and it relative price to other items.

Money is a very convenient common denominator, a common measure of value that is also used as a medium of exchange. Money also encourages specialization. Without money, workers and other resources could not be paid except in the output produced. All those who participated in the production of the good would have to collectively exchange it for all the goods and service desired by the resource owners.

Money itself has value only in relation to the resources, goods, and services that can be obtained with it. When people say that they want money, they really mean that they want the things that money can buy.

In this sense, money imparts value only when someone parts with it. Evaluate and explain the following statements: LO2 a. The market system is a profit-and-loss system.

Competition is the disciplinarian of the market economy. Answer: a The quotation is accurate. In a market system, producer decisions are motivated by the attempt to earn profits. If the product cannot be produced for a profit—in other words, if losses are involved in production—the capitalist firm will respond by seeking lower cost production methods and may halt the production of goods completely.

First, it forces firms to seek the leastcost production methods or face being driven out of business by their rivals. Second, it prevents successful producers from charging whatever the market will bear. Competition keeps prices at a level where total revenue will just cover the total cost of production including a normal profit, but no more in the long run. If sellers try to charge a price that will earn them economic profits, new firms will enter the industry, increasing supply, and lowering prices until the economic profits are eliminated.

Competition is indispensable in this role, because otherwise some other method would have to be found to direct firms to use the least-cost production technique and to charge a price that provides only a normal return.

Where competition does not exist, such as in natural monopolies like public utility companies, regulators or publicly owned companies must assume the role of disciplinarian.

Experience has shown that this is a difficult process and does not achieve the same results as easily as a competitive market situation. Some large hardware stores such as Home Depot boast of carrying as many as 20, 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? LO3 Answer: The quest for profit led firms to produce these goods. Producers looked for and found the least-cost combination of resources in producing their output.

Resource suppliers, seeking income, made these resources available. Consumers, through their dollar votes, ultimately decide on what will continue to be produced. How does the emergence of MP3 or iPod technology relate to this idea? LO3 Answer: Creative destruction refers to the process by which the creation of new products and production techniques destroys the market positions of firms committed to producing only existing products or using outdated methods. The ability to download and store a large number of songs, and the superior quality of MP3 is causing a decline in the CD industry, just as CDs once replaced cassette tapes, which had previously replaced phonographs records.

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?

LO4 Answer: In market economies, buyers of inputs know that sellers want to make resources available for sale because that is how they earn their profits.

In command economies the availability of inputs depends on what was specified in the plan, and how well the plan was executed. There is no opportunity at least not legally to offer greater payments to get those resources provided. Distinguish between the resource market and the product market in the circular flow model.

In what way are businesses and households both sellers and buyers in this model? What are the flows in the circular flow model?

LO5 Answer: The resource markets are where the owners of the resources the households sell their resources to the buyers of the resources businesses. In the product markets, businesses sell the goods and services they have produced to the buyers of the goods and services, the households. Households individuals either own all economic resources directly or own them indirectly through their ownership of business corporations.

These households are willing to sell their resources to businesses because attractive prices draw them into specific resource markets. Businesses buy resources because they are necessary for producing goods and services. The interaction of the buyers and sellers establishes the price of each resource. In the product market, businesses are the sellers and householders are the buyers; their role in the market has been reversed. Each group of economic units both buys and sells. How does shielding employees and suppliers from business risk help to improve economic outcomes?

Who is responsible for managing business risks in the market system? LO6 Answer: This process allows the owners of a business to attract employees and. If some of the business risk was put on these groups, most of them would stay away. In the same sense, all the business risk is put on the owners, due to the fact that they are the ones who will enjoy the profits, or suffer the losses, of the business.

This gives them an incentive to manage the business wisely. Answer: The institution of private property is a primary reason why resources are arranged logically and productively. Private property eliminates randomness to the allocation of resources, as property owners act in deliberate ways to protect and maximize the benefits from their property. Owners pursue the greatest possible returns from their property, drawing resources to their most valued uses.

Through the interaction of millions of economic agents all trying to use their private property to maximize wellbeing, a complex, logical, and productive arrangement of resources results. Decide whether each of the following descriptions most closely corresponds to being part of a command system, a market system, or a laissez-faire system. LO1 a. A woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area.

Shops stock and sell the goods their customers want but the government levies a sales tax on each transaction in order to fund elementary schools, public libraries, and welfare programs for the poor. The only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforce contracts between private citizens. Answer: a. Match each term with the correct definition. LO2 private property freedom of enterprise mutually agreeable freedom of choice self-interest competition market a.

An institution that brings buyers and sellers together. The right of private persons and firms to obtain, control, employ, dispose of, and bequeath land, capital, and other property. The presence in a market of independent buyers and sellers who compete with one another and who are free to enter and exit the market as they each see fit.

The freedom of firms to obtain economic resources, decide what products to produce with those resources, and sell those products in markets of their choice. What each individual or firm believes is best for itself and seeks to obtain. Economic transactions willingly undertaken by both the buyer and the seller because each feels that the transaction will make him or her better off.

The freedom of resource owners to dispose of their resources as they think best; of workers to enter any line of work for which they are qualified; and of consumers to spend their incomes in whatever way they feel is most appropriate. Market; b.