Newsela economics #3 Market

Which of the following details is MOST important to the development of the article's CENTRAL idea(What is a free market economy)?

• At its most basic, a free market economy is one that is governed strictly by the forces of supply and demand with no governmental influence. In practice, however, nearly all legal market economies must contend with some form of regulation.

• Socialist economies, where the government may own some but not all the means of production (such as the nation's freight and passenger rail lines), can also be considered market economies as long as market consumption is not heavily regulated.

• Communist governments, which control the means of production, are not considered market economies because the government dictates supply and demand.

• Financial institutions, such as banks and brokerages, exist in order to supply individuals with the means to acquire goods and services. These markets profit by charging interest or fees on transactions.

What is the relationship between the following selections from the article?

There's a reason why most of the world's most advanced nations adhere to a market-based economy. Despite their many flaws, these markets function better than other economic models.

Some of those profits benefit individuals or investors, while other capital is channeled back into the business to seed future growth. As markets expand, producers, consumers and workers all benefit.

• The first selection presents a problem and the second selection highlights a solution.

• The first selection highlights a solution and the second selection presents a problem.

• The first selection is a claim and the second selection shows support for the claim.

• The first selection is a claim and the second selection is a contradiction to the claim.

Examine Image 1 and read the paragraph from the section “Definition” below.

Economists describe a market economy as one where goods and services are exchanged at will and by mutual agreement. Buying vegetables for a set price from a grower at a farm stand is one example of economic exchange. Paying someone an hourly wage to run errands for you is another example of an exchange.

Which statement accurately compares the image and the paragraph?

• The image highlights a problem with economic exchange that is mentioned in the excerpt.

• The image highlights another example of economic exchange that is described in the excerpt.

• They both emphasize the idea that people can be paid hourly wages for their services.

• They both emphasize the idea that people can exchange their services in order to obtain goods.

Image 2 shows a scale of economic systems.

What is an advantage to presenting economic systems in this way?

• It allows the readers to understand that governments based on market economies tend to have an economic advantage over planned economies.

• It allows the readers to understand where different countries fall in terms of the types of governments and economies they have.

• It demonstrates to the readers that it is best for economies to be in the middle so that they do not face the repercussions of extreme ideas.

• It demonstrates to the readers that communist governments can be considered a market economy because they are on the spectrum.

Read the following paragraph from the introduction [paragraphs 1-3].

We actually deal with the concept of opportunity cost every day. For example, options for a day off work might include going to the movies, staying home to watch a baseball game, or going out for coffee with friends. Choosing to go to the movies means the opportunity cost of that action is the second choice.

What can be inferred from the paragraph above?

• People usually do not realize they are weighing an economic concept when deciding how they would most prefer to spend their time.

• Most people consider staying home to watch a baseball game a better economic option than spending their money on coffee.

• Going to the movies is a perfect example of explicit opportunity cost and going out for coffee is an example of implicit opportunity cost.

• Dealing with the concept of explicit and implicit opportunity cost is actually not as common as many people think it is.

Read the following paragraph from the section "Explicit Versus Implicit Opportunity Costs."

Generally, making choices includes two types of cost: explicit and implicit. Explicit costs are monetary expenses, while implicit costs are intangible and therefore hard to account for. In some cases, such as weekend plans, the notion of opportunity cost includes only these forgone alternatives or implicit costs. But in others, such as a business' profit maximization, opportunity cost refers to the difference in the total of this type of implicit cost and the more typical explicit monetary cost between the first choice and the next best alternative.

Which idea is BEST supported by this paragraph?

• There is usually only one right choice for individuals and businesses about opportunity costs.

• Businesses that make the most profits are always those that consider explicit costs first.

• Implicit costs can complicate the more straightforward questions regarding explicit costs.

• Weekend plans with friends almost never involve consideration of explicit costs like money.

Read the following paragraph from the section "Analyzing Opportunity Costs."

The concept of opportunity cost is particularly important because, in economics, almost all business costs include some quantification of opportunity cost. To make decisions, we must consider benefits and costs, and we often do this through marginal analysis. Companies maximize profits by weighing marginal revenue against the marginal cost. What will make the most money when considering the operating costs? The opportunity cost of an investment would involve the difference between the return on the chosen investment and the return on the other investment.

Which word from the paragraph helps to explain what "quantification" means?

• business

• analysis

• operating

• investment

What is the meaning of the word "perks" as it is used in the following sentence?

For example, weighing job offers includes analyzing more perks than just wages.

• spreads

• benefits

• honors

• wakens

Specialization lead to efficiency, What does efficiency lead to?

• Profit

• Skill

• Factors of production

• Factor Markets

Who controls the free market in a Market Economy?

• Consumers

• Producers

• Government