1) What is a Market Economy? (page 215)a. Resource Inequality and Hardship: competition among actors leads towinners and losers.b. Production for Profit, not Need: Goods are produced based on theirprofitability not on societal needs.c. Severe Economic Cycles: Cyclical nature of the system from hyperactivity toeconomic slowdown.2) What is a Command Economy? (page 216)a. Limited Incentive for Efficiency: lacks incentives for continued economicgrowth b. Unresponsive Production: Production based on government decree not byconsumer needc. Overcentralization and Inflexibility: government planners cannot know theintricacies of all industries and thus cannot act efficiently 3) What is a mixed economy (page 217)A mixed economy is an attempt to combine the strengths of market and commandeconomies while also minimizing their shortcomings. 4) Define Economic Growth (page 203)Economic growth is characterized as the increased production of goods produced,bought, and sold by all the actors in an economic system. As an economy grows, itbecomes increasingly complex and more actors become involved in the productionand distribution of goods. 5) What are the factors of production? (page 200)Land: the ground and any raw materials on it or in the groundLabor: human productive input (“work”)Capital: nonhuman productive input from other resources (financial resurces,machinery, and technology)6) What is the difference in Gross Domestic Product (GDP) and Gross National Income(GNI)? (page 207)GDP: is the total value of all final goods produced by all people within a state’sboundaries, whether or not they are citizens. GDN: includes the production of all citizens of the state, whether they are inside thestate’s boundaries or not. 7) Explain how Supply and Demand affect price. (page 202)If demand is low relative to supply, prices decrease. If demand is high relative tosupply, prices increase. The perfect balance point between supply and demand isknown as the equilibrium point. 8) Define capitalism? (page 220)Capitalism is a system in which private economic actors are quite free from stateconstraint. Capitalism holds private property rights as fundamental. This systemlimits government activity that might shift resources among private actors.9) Define communism? (page 220)The centerpiece of communism is the socialization of resources. It is the notion thatthe state must control society’s land, labor, and capital to achieve substantialequality for all citizens. 10) Define socialism? (page 221)Socialism seeks a complex balance between state involvement and private control ofthe economy. A key policy goal is a relatively equitable distribution of benefits to allcitizens. It attempts to be the middle theory of state economics betweencommunism and capitalism. 11) Differentiate between imports and exports (page 205)Imports are the goods that a country’s actors purchase from firms in anothercountry. Exports are the goods and factors of production that are sold to actorsoutside the state’s boundaries.12) What are the three different types of political economies and which politicalideology do they correlate to? (page 199)a. Market economy  capitalismb. Command economy communismc. Mixed economy socialism13) What is political economy? (page 147) Political economy is the combination of politics and economics. It explains theconnection between the economic system and the political system. It associates howdifferent political economies correlate with political ideologies. 14) What is a good and how is it produced?A good is either a product or service. It is produce by an actor (firm) by gaining acombination of productive resources. 15) In economic terminology what classifies as a household? A household is an owner who controls one or more factors of