L 8, Sec 1H: Production, Economic Resources and Resource Allocation

What are some assumptions about the free market?

(a) Firms aim to maximize their profits. (b) The greatest benefit is sought by the consumer at the least cost. (c) Employees aim to maximize their wages in relation to the cost of working. (d) Firms are able to freely decide what to produce and who their customers are. Individuals make decisions freely.

What are the main features of a Market Economy?

(a) Private Property (b) Freedom of Choice (c) Self-Interest (d) Competition Price Mechanism (e) Limited Role of Government (f) Ownership and Efficiency of Provision

List the 3 advantages of the command economy?

1. All economic decisions are made by the Government 2. Prices do not change 3. The Government looks after the best interest of the public

All of the following are assumptions about the free market except...? (a) Firms aim to maximize their profits. (b) The greatest benefit is sought by the consumer at the least cost. (c) Government has full control of the economy. (d) Employees aim to maximize their wages in relation to the cost of working. (e) Firms are able to freely decide what to produce and who their customers are. Individuals make decisions freely.

(c) Government has full control of the economy.

List the 3 disadvantages of the command economy.

1. Inefficient allocation of resources by the Government 2. Government cannot always determine accurately the level of demand 3. May lead to wastage, corruption, favoritism

List the 5 main features of the command economy?

1. Public Ownership 2. Planned Production 3. Prices 4. Profits 5. Ownership and Efficiency of Provision

The list below represents the disadvantages of which economy? 1. Inefficient allocation of resources by the Government 2.• Government cannot always determine accurately the level of demand 3. May lead to wastage, corruption, favoritism

Command economy

How do more successful firms earn higher profits when the government exercises control over the economy?

By searching for new products and better production techniques.

The following list are the main features of which economy? 1. Public Ownership 2. Planned Production 3. Prices 4. Profits 5. Ownership and Efficiency of Provision

Command economy

The list below represents the advantages of which economy? 1. All economic decisions are made by the Government 2. Prices do not change 3. The Government looks after the best interest of the public

Command economy

How is competition encouraged in a government-controlled economy?

Less efficient firms are driven out of business which encourages greater efficiency.

Which economy is described below? A planned economy where all the economic decisions regarding resource allocation such as "what," "how" and "for whom to produce" are undertaken by a central authority, which is usually the State or Government.

Command Economy

In which economic system or economy does the government attempt to meet all the needs of the consumers, fully utilizing all resources to minimize unemployment, inflation, recession and idle plants? How does this action help the economy?

Command. It encourages consumers to curb their demand for greater investment capital so that economic development can be promoted.

Of the 5 disadvantages of government-controlled economies, which is depicted below? Allows more successful firms to drive out the less successful ones. Eventually, a very few large firms could dominate an entire industry, exercise great market power and charge prices well above the cost of production. This may lead to a single firm dominating an industry and creating a monopoly.

Competition

The following describes which feature of the market economy? Changes in prices act as a kind of signaling device to producers and consumers and cause them to change plans. Consumers tend to buy more at lower prices so production will increase.

Competition Price Mechanism

The following describes which feature of the market economy? Free enterprise economy means free from Government controls. The main business of Government is to secure defense and maintain law and order.

Limited Role of Government

What answers what, how, where and when public and private firms should produce goods and services in the most effective and efficient manner.

Economic systems

What is barter?

Exchange of goods and services for other goods and services.

True or False. In a market economy: •Vocations and jobs are passed down from one family member to another so positions are established • Individuals who own most of the capital will continue to own this capital

False, this occurs in a traditional economy.

True or False. All firms will survive in a mixed economic system.

False. Only firms which are able to complete effectively will survive in a mixed economic system.

True or False. Private benefits are lost by a person who buys a good or service.

False. Private benefits are gained by a person who buys a good or service.

The following describes which feature of the market economy? Individuals are free to set up businesses, firms are free to decide what and how to produce, workers are free to work, and consumers are free to spend their incomes as they wish.

Freedom of Choice

When does full employment occur?

Full employment occurs when all of the factors of production are fully utilized, such that the economy is at its maximum level of output.

Of the 5 disadvantages of government-controlled economies, which is depicted below? Private ownership of land and capital enables those that are more successful in the world of business to accumulate large amounts of wealth and people to acquire wealth by inheritance rather than by effort.

Inequalities

The following defines which economic system? Free market or capitalist economy based on free trade, supply and demand where individuals, households and firms make the economic decisions to buy or sell commodities.

Market Economy

The following are the advantages of which economic system? • Combination of free market and planned economy • Competitive markets allocate the resources

Mixed Economic System

The following are the disadvantages of which economic system? • Monopolies, which can take control of market, can be created since the economic questions are answered by firms. • Inequitable distribution of wealth can occur where people who can afford the price of goods will be able to receive benefits from them.

Mixed Economic System

The following describe which economic system? • Combination of a free market and a planned economy. • Both the Government and the forces of demand and supply allocate the resources of the economy. • Private sector co-exists with public sector and there are state owned and privately owned enterprises.

Mixed Economic System

How do consumers exercise power over firms in a government-controlled economy?

Only those firms which supply what the consumer is prepared to buy will survive.

What does the following describe? The competitive markets allocate the resources while the Government implements economic policies to address market failures and fluctuations in the business cycle. Individuals own most of the factors of production while the Government owns a small proportion and resource allocation mostly depends on the individuals themselves.

Ownership & efficiency of provision.

The following describes which feature of the market economy? Firms and individuals are freely able to own land and capital and utilize them for their personal benefit. Efficiency of provision is not at its highest because the entrepreneur seeks to maximize his profit and may not be providing the products at the best price available.

Ownership and Efficiency of Provision

Which feature of the command economy is described below? The Government is the sole owner of the factors of production, land, capital, receives the rent earned and interest from the capital, determines the input required to produce the output, invest in the capital, and acts as the entrepreneur, organizing and managing the factors of production, and earns the profit.

Ownership and efficiency of production

What does a shortage in a command economy usually mean? Do these shortages cause price increases?

Physical rationing is being used. Shortages do not cause price increases.

Which feature of the command economy is explained below? The Government plans the output and input of the economy. The national plan sets production targets and allocates resources to industries (mines, factories, farms, power stations) by Government directives.

Planned production.

The following describes which feature of the market economy? Individuals have the right to own, control, and dispose of land, buildings, machinery and other natural and manufactured factors of production in capitalist economies.

Private Property

What is private ownership (a feature of the command economy) limited to?

Private ownership is limited to personal possessions or small businesses.

Which feature of the command economy is described below? Enterprises are not privately owned and there are no shareholders. Production is not for profit and depends on what the Government thinks will be in the best interest of the people.

Profits

What does public ownership (feature of the command economy) refer to?

Public ownership of all the means of production. The land and all types of capital are owned by the State.

The following describes which feature of the market economy? People try do what is best for themselves. Firms maximize profits, workers maximize incomes, consumers maximize satisfactions.

Self-Interest

Of the 5 disadvantages of government-controlled economies, which is depicted below? Private costs are incurred by a firm from the production of goods and services. Sometimes, an additional cost to society results from pollution of the atmosphere, improper waste disposal into rivers, many nuisance and dangers suffered by innocent people. Firms in a market economy can ignore social costs.

Social costs & benefits

What do economic systems aim to do?

Solve the problems of a country, primarily resource allocation.

In a mixed economic system, the law of demand and supply rules. What does this refer to?

The ability of individuals to employ their resources in order to gain the highest reward. Market forces also adequately supply consumer demand.

The following are advantages of which economy? • People have freedom to buy the goods and services they want • Prices are determined by the forces of demand and supply

The market economy

The following are the main features of which economy? (a) Private Property (b) Freedom of Choice (c) Self-Interest (d) Competition Price Mechanism (e) Limited Role of Government (f) Ownership and Efficiency of Provision

The market economy

The following are disadvantages of which economy? • Government plays a small role • Firms can influence prices by altering their output

The market economy.

What is the aim of government in the planned production feature of the command economy?

To ensure that each household receives the amount it needs in a fair manner.

A village is an example of which economic system.

Traditional

Agriculture, pottery, and clothing are activities of which economic system?

Traditional

The following characteristics are found in the market/traditional/command/mixed economy. • No upward movement of labor in the community • Risk-taking is very rare. • Inefficiency as excess food and goods are not produced, so people barely survive. • Skills and talents are not used to develop the other factors of production.

Traditional

• Economic Questions answered by custom • Predominately Agricultural • Developing or "3rd World" • Trade and barter oriented • Low GDP & PCI (per capita income = avg. inc.) The following is a summary of the market/traditional/command/mixed economy.

Traditional

The following defines which economic system? Community operates on tradition, customs and habits. Usually self-sufficient and produce enough output to meet their needs. As a result, trade in and outside community is limited. No question on what to produce and how it will be produced and allocated to individuals in society.

Traditional Economic System

True or False. In a centrally planned economy, prices are not free to change in response to changes in supply and demand. They are fixed by the Government.

True

True or False. Due to the market price of a product not giving a true indication of the total benefits provided, the government tries to calculate all the costs incurred and estimate the value of all the benefits derived when planning projects.

True.

True or False. In a market economy, the minimum amount of Government control allows individuals to freely buy products and spend their wages.

True.

True or False. In a market economy, there is: • No government intervention • Capital and land are privately owned. • Demand and supply determine the prices of goods and services

True.

True or False. Rules, regulations, laws, taxes and types of goods and services for different segments of society must be established in an economic system.

True.

Of the 5 disadvantages of government-controlled economies, which is depicted below? • Market system rewards businesses that are more successful & allows the unsuccessful, to fall by the wayside. • Workers lose their jobs and shareholders lose the money they have put into the business. • Only the state can provide adequate help for unsuccessful or failed businesses.

Welfare

In a market economy: a. If a firm (decreases/increases) its supply of product or service, the price falls, benefiting the consumer. b. If the firm (decreases/increases) its price by reducing output, the entrepreneur benefits while the consumer is at a disadvantage.

a. increases b. increases

What are the advantages of traditional economic systems?

• Basic economic questions are already answered. • Positions within society are already established.

What are disadvantages of the market economy?

• Government plays a small role • Firms can influence prices by altering their output

In a market economic system: • When there is a high demand for a good or service, the price (increases/decreases). When demand falls, the price (falls/rises). • When the demand is greater than the supply, the price (increases/decreases). When the supply is greater than the demand, the price (increases/decreases).

• Increases, falls • Increases, decreases

What are the disadvantages of traditional economic systems?

• Inefficient provision of goods and services • Inadequate use of skills in relation to the factors of production • No upward movement of labor

What are five (5) the disadvantages government-controlled economy?

• Inequalities • Instability • Competition • Welfare • Social costs & benefits

What are the five (5) advantages of the government exercising control over the economy?

• More freedom of choice for producers and consumers. • Encourages competition between firms • Successful firms can earn higher profits • Large numbers of civil servants aren't required to run system. • Consumers have great powers.

What are the advantages of the market economy?

• People have freedom to buy the goods and services they want • Prices are determined by the forces of demand and supply

What are the 4 main types of economic systems?

• Traditional Economy • Market Economy • Command Economy • Mixed Economy

What important questions must every society answer in relation to goods and services?

• What should be produced, and in what quantity? • How should the goods and services be produced? • For whom should they be produced? • Should max use of irreplaceable minerals be done now or restrict usage for availability to future generations.