Please write answers for each of the following questions: 0 1. What is a market
ID: 1144658 • Letter: P
Question
Please write answers for each of the following questions: 0 1. What is a market economy and why is it essential that government play a role in such an economy? 2. The three primary forms of business are sole proprietorships, partnerships, and corporations. You are contemplating starting a business. For each of the following proposals, explain which of the three types of businesses would be most appropriate. In each case describe the advantages and disadvantages of your choice. (a) You are a music lover and are disgusted with the selection of compact discs available at the stores near your college. So, you decide to open up a store selling new and used compact discs. (b) After a late night cram session, you and your roommate are in need of some pizza, but no restaurants are open. You decide to open an all night pizza parlor. (c) You have an idea that will make you a billionaire before you graduate from college: a pizza delivery service from any restaurant to any dorm. In order to make your revenue goal a reality, a local venture capital firm has informed you that you will need to nationally franchise your operation.Explanation / Answer
1. A market economy is an economy in which there is no central controlling authority and in which production, consumption, price, etc. are determined by the market forces of demand and supply. In a market economy, all economic agents like buyers, sellers, etc. freely interact and the forces of demand and supply determine the market equilibrium.
A market economy cannot function without certain prerequisites like property rights, and laws to enforce contracts, etc. Also, a market economy is also subject to market failure. Therefore, a market economy needs a neutral observer and a protector of property rights and laws. The government plays this role in the market economy.