1.1.4-1.1.6

Question 1

What does a PPF show?

Answer 1

Maximum possible output of 2 goods/services, with given factors of production.

Question 2

What does the PPF curve show?

Answer 2

Shows the maximum possible production.

Question 3

What does a Concave Curve show?

Answer 3

Increasing opportunity cost.

Question 4

What is Increasing Opportunity cost?

Answer 4

As we move further along the curve a company beings to specialise to the specific good. They will produce less of the other good.

Question 5

What happens if a PPF is drawn linear?

Answer 5

Opportunity cost remains unchanged no matter how much units are produced.

Question 6

What are the three types of Efficiency?

Answer 6

Productive
Allocative
Pareto

Question 6

What is Productive Efficiency?

Answer 6

When all given factors of production are being fully utilised with no waste.

Question 7

What is Productive Inefficiency?

Answer 7

Where factors of production are not being fully utilized.

Question 8

What is the Allocative Efficiency?

Answer 8

Whether the amount of goods being produced are satisfying demand.

Question 9

Why can Allocative Efficiency not be seen be a PPF curve?

Answer 9

There is no demand curve.

Question 10

What is Pareto Efficiency?

Answer 10

No one can get better off, without someone being worse off.

Question 11

What is specialization?

Answer 11

Concentration of production on a narrow range of goods and services.

Question 12

3 Benefits for Specialisation?

Answer 12

Allows countries to concentrate on things they are best at.

Quality can increase as you become an expert.

Output increases

Question 13

What is ‘Division Of Labour’?

Answer 13

The division of labour occurs where production process is broken down into many separate tasks

Question 14

What is 3 Advantages of the Division of Labour?

Answer 14

Workers are highly productive
Higher quality
Lower prices

Question 15

What are 3 Disadvantages of Division of Labour?

Answer 15

Demotivating workers
Higher worker turnover
No transferable Skills

Question 16

What is a Free market Economy?

Answer 16

The free market is an economic system based on supply and demand with no government control.

Question 17

What is a Command Economy?

Answer 17

A command economy is one in which a centralized government controls production and determines output levels.

Question 18

What are Free Markets remembered with and what does it stand for?

Answer 18

E- Efficient (Allocative)
P-Productivity (Lots of competing)
I- innovation
C- Competition (more innovation)

Question 19

3 Advantages of Free market?

Answer 19

No risk of gov failure
Allocative efficiency
Innovation

Question 20

3 Disadvantages of Free Market Economy?

Answer 20

Public goods will not be allocated
Externalities are not compensated for
Markets can fail

Question 21

What is a Mixed Economy?

Answer 21

A blend of free market and command market.

Question 22

3 Advantages of a Command Economy?

Answer 22

Social equality rather than profit maximization
Less unemployment
Gov owns monopolies so no consumer exploitation.

Question 23

3 Disadvantages of Command Economy?

Answer 23

Lack of competition=less innovation
Black Markets increase
Receiving same wage demotivates people from aiming for high skill jobs.
Allocatively inefficient

Question 24

What is the role of a Mixed Economy?

Answer 24

Government funding is raised through taxation and spent on public goods and merit goods.

Question 25

What did Adam Smith advocate for and why?

Answer 25

Free markets with low level of gov interaction, due to merit and public goods benefiting significantly. But there isn't enough of them.

Question 26

What did Fredrick Hayek Advocate for and why?

Answer 26

Mixed economies, due to Command economies and Free markets have information gaps which lead to surpluses or shortages in goods/services.

Question 27

What did Karl Marx believe?

Answer 27

Command Economies, due to Free markets leading to capitalism and eventually exploiting workers and leading to inequality.

Question 27

What are the 4 Functions of Money?

Answer 27

Standard of Deferred payment. Store of Value. Measure value Medium of Exchange

Question 27

Standard of Deferred payment?

Answer 27

Allows money to be used as loans, you can buy now and purchase later. The person loaning must be confident they will get a equivilant value back.

Question 27

What is the Store of Value?

Answer 27

Money can hold its value overtime, this means money can be saved and still be valuable in the future.

Question 27

What is Measure Value?

Answer 27

Ascribes value to goods and services, allowing buyer and seller to understand its value, in order to make decisions in best interest of both.

Question 28

What is Medium of exchange?

Answer 28

Eliminates the problem of bartering, instead of exchanging goods that two people would not mutually want. This allows money to facilitate the exchange of goods.