1.2-The allocation of resources Flashcards
What is the definition of resource allocation?
Resource allocation is the process of distributing available resources among various projects or business units.
True or False: Scarcity necessitates resource allocation.
True
What are the three main types of economic resources?
Land, labor, and capital.
Fill in the blank: __________ is a situation where unlimited wants exceed limited resources.
Scarcity
What does the term ‘opportunity cost’ refer to?
Opportunity cost is the value of the next best alternative that is forgone when making a decision.
Multiple Choice: Which of the following is NOT a type of resource? A) Labor B) Capital C) Demand D) Land
C) Demand
What is meant by ‘allocative efficiency’?
Allocative efficiency occurs when resources are distributed in a way that maximizes total benefit to society.
True or False: A market economy relies on government intervention for resource allocation.
False
What is ‘productive efficiency’?
Productive efficiency occurs when goods are produced at the lowest possible cost.
Fill in the blank: In a command economy, resource allocation is determined by __________.
Government planning
What role do prices play in a market economy?
Prices signal the relative scarcity of resources and guide their allocation.
Multiple Choice: Which factor influences the demand for a product? A) Consumer preferences B) Government regulations C) Production costs D) All of the above
D) All of the above
What is a ‘public good’?
A public good is a product that is non-excludable and non-rivalrous, meaning it can be consumed by multiple individuals without diminishing its availability.
True or False: Externalities can affect resource allocation.
True
What is the difference between ‘fixed’ and ‘variable’ costs?
Fixed costs do not change with the level of output, while variable costs do.
Fill in the blank: The __________ curve shows the relationship between the price of a good and the quantity supplied.
Supply
What is a ‘market failure’?
Market failure occurs when the allocation of goods and services is not efficient, often due to externalities, public goods, or monopolies.
Multiple Choice: Which of the following is a characteristic of perfect competition? A) Many buyers and sellers B) Product differentiation C) High barriers to entry D) None of the above
A) Many buyers and sellers
What is the purpose of government intervention in resource allocation?
To correct market failures and promote social welfare.
True or False: The law of demand states that, all else being equal, as the price of a good increases, the quantity demanded decreases.
True
What is ‘diminishing marginal utility’?
Diminishing marginal utility refers to the decrease in the added satisfaction a consumer gains from consuming one more unit of a good.
Fill in the blank: The __________ curve illustrates the maximum production capacity of an economy.
Production possibilities
What is the significance of the ‘invisible hand’ in economics?
The ‘invisible hand’ suggests that individuals pursuing their own self-interest can lead to beneficial outcomes for society as a whole.
Multiple Choice: Which of the following is an example of a negative externality? A) Pollution B) Education C) Public parks D) None of the above
A) Pollution
