ECON 101 Chapter Notes - Chapter 3: Price Ceiling, Natural Monopoly, International Trade
Document Summary
Most household income arises from the sale of labor, and most household income is spent on personal consumption, primarily services. Household members once built their own homes, made their own clothes and furniture, grew their own food, and supplied their own entertainment. Over time, however, the efficiency arising from comparative advantage resulted in a greater specialization among resource suppliers. Firms bring together specialized resources and in the process reduce the transaction costs of bargaining with all these resource providers. U. s. firms can be organized in three different ways: as sole proprietorships, partnerships, or corporations. Because corporations are typically large, they account for the bulk of sales. When private markets yield undesirable results, government may intervene to address these market failures. In the united states, the federal government has primary responsibility for providing national defense, ensuring market competition, and promoting stability of the economy. State governments provide public higher education, prisons, and with aid from the federal government highways and welfare.
