BASIC PROBLEMS OF ECONOMIC ORGANIZATION – QUESTIONS

Question 1

Name 3 fundamental economic problems common for every human society.

Moodle

Answer 1

What to Produce?
How to Produce?
For whom to Produce?

What commodities are to be produced and in what quantities?

How shall goods be produced?

For whom shall goods be produced?

Question 2

Are these problems the same for all economies?

fundamental economic problems

Answer 2

Yes. And there are three basic questions of economics:

What commodities are to be produced and in what quantities?

How shall goods be produced?

For whom shall goods be produced?

Question 3

What´s the difference between input and output?

Moodle

Answer 3

Inputs are commodities or services used by firms in their production processes. An economy uses its existing technology to combine inputs to produce outputs.

Outputs are the various useful goods or services that are either consumed or employed in further production.

Question 4

Divide factors of production into 3 main categories.

Moodle

Answer 4

Land - or more generally natural resources – represents the gift of the nature to our productive processes. It consists of the land, energy resources, and non-energy resources.

Labor - Labor consists of the human time spent in production.

Capital - form the durable goods of an economy, produced in order to produce yet other goods.

Question 5

Name some nature resources.

Answer 5

wood
coal
oil
gas
ore

Question 6

What is the main crucial input for an advanced industrial economy?

Moodle

Answer 6

The most crucial input for an advanced industrial economy is labor.

Question 7

Which input isn´t produced in order to be directly consumed?

Answer 7

x

Question 8

What characteristics are typical for command economy?

Moodle

Answer 8

The government answers the major economic questions through its ownership of resources and its power to enforce decisions.

Question 9

Who makes the main decisions about production and consumption in a market economy?

Answer 9

Individuals and private firms make the major decisions about production and consumption.

Jednotlivci a soukromé firmy dělají hlavní rozhodnutí o produkci a spotřebě.

Question 10

Explain “The commodities that yield the highest profit”. What economy is it typical for?

Moodle

Answer 10

It is tipical for market economy.
Firms produce the commodities that yield the highest profits (the what).

Firmy produkují komodity, které přinášejí nejvyšší zisky (co vyrábět).

Question 11

Is it possible have 100% market economy? Why / why not?

Answer 11

not

Question 12

What is the role of government in a mixed economy?

Moodle

Answer 12

Government sets laws and rules that regulate economic life, produces educational and police services, and regulates pollution and business.

Vláda stanovuje zákony a pravidla, které regulují hospodářský život, produkují vzdělávací a policejní služby a regulují znečištění a podnikání.

Question 13

What does the law of scarcity say?

Answer 13

Goods are scarce because there are not enough resources to produce all the goods that people want to consume.

Question 14

What are unattainable choices in the PPF?

Answer 14

Production above the production possibilities frontier (on the right)

Question 15

Where would be the point expressing a choice among alternatives if some resources aren´t used in the best possible way?

Answer 15

x

Question 16

How would you describe an economy operating on the frontier (the PPF)?

Answer 16

The maximum amounts of production that can be obtained by an economy, given the technological knowledge and quantity of inputs available.

Question 17

What are possible reasons for an economy being inside its PPF?

Answer 17

Unemployed resources (idle workers, idle factories, and idle land)

Question 18

What are the major instruments of government policy?

Answer 18

Jaké jsou hlavní nástroje vládní politiky?
Taxes
that serve to reduce private expenditures

Expenditures
that induce firms or workers to produce certain goods or services

Regulations
or controls that direct people to perform or desist from certain economic activities (such as rules concerning the amount that firms can pollute

Question 19

What is the aim of taxes?

Answer 19

Co je účelem daní?

that serve to reduce private expenditures

Question 20

Explain the function of government in a modern mixed economy.

Answer 20

1 Vytvoření právního rámce pro tržní ekonomiku
2 Ovlivňuje alokace zdrojů ke zlepšení ekonomické efektivity
3 Tvoří programy ke zlepšení distribuce příjmů
4 Stabilizace ekonomiky prostřednictvím makroekonomických politik

1 Establishing the legal framework for the market economy
2 Affecting the allocation of resources to improve economic efficiency
3 Establishing programs to improve the distribution of income
4 Stabilizing the economy through macroeconomic policies

Question 21

Why is the legal framework important?

Answer 21

Proč je právní rámec důležitý?

The government establishes the rules of the market.

Question 22

Name some market failures.

Answer 22

Vyjmenujte některá selhání trhu.

Discrimination in labor markets. When some groups are discriminated against or excluded from high-paid jobs, government may decide to step in, outlaw discriminatory actions.

The breakdown of perfect competition. When monopolies or oligopolies collude to reduce rivalry or drive firms out of business, government may apply antitrust policies or regulation.

The presence of significant externalities – too much air pollution or too little investment in knowledge. Government may need to control the emissions of polluters or to support basic science.

Question 23

In which situations can be income redistribution useful?

Answer 23

V jakých situacích může být přerozdělování příjmů užitečné?

The invisible hand might be marvelously efficient but at the same time produce a very unequal distribution of income.

Question 24

Why do governments attempt to smooth out the business cycle?

Answer 24

Proč se vlády snaží vyrovnávat hospodářský cyklus?
to prevent chronic unemployment, economic stagnation, and price inflation and to encourage rapid economic growth.