Chapter 1

Question 1

factors of production

Answer 1

Labour, Capital, Entrepreneurs, Natural resources, Information

Question 2

Revenue-Expense=?

Answer 2

Profit

Question 3

1. What is a command economy?

2. What are the two basic forms of command economies?

Answer 3

1. A centralized government controls most or all factors of production.
2. Communism and Socialism

Question 4

1. What is a market economy?

2. What are the two basic forms of market economies?

Answer 4

1. Individuals make production and allocation decisions through the mechanism of supply/demand
2. Mixed economy and capitalism

Question 5

B2B and B2C?

Answer 5

Business to Consumers

Business to Business transactions

Question 6

1. How is the circular flow of in a market economy created?

2. What is an input market? An output market?

Answer 6

1. The circular flow is created when households supply firms with the factors of productions, and then the firms supply households with goods/services.
2. Input market is supplied with factors of productions by households, and demanded by firms.
   Output market is supplied by firms with goods and services, and demanded by households.

Question 7

Communism

Answer 7

Government owns and operates all sources of production.

Question 8

Socialism

Answer 8

Government owns and operates only selected major industries.

Question 9

Capitalism

Answer 9

Private ownership of the factors of production and encourages entrepreneurship.

Question 10

Mixed economy

An example of trend

Answer 10

Features both command and market economies.

Privatization: process of converting government controlled enterprises into private ones

Question 11

Deregulation

Answer 11

reduction in the number of laws affecting business activity

Question 12

How does the government influence business?

Answer 12

As a Customer
As a Competitor
As a Regulator
As a Taxation Agent 
As a provider of incentives and financial assistance 
As a provider of essential services

Question 13

How does businesses influence the government?

Answer 13

Lobbying

Joining in trade associations

Question 14

Four elements of private enterprise

Answer 14

Private property
Freedom of choice
Profits
Competition

Question 15

Perfect Competition

Answer 15

All the firms in an industry is small, there is a lot of firms, and they all virtually produce the same products. No one can fluctuate the market price.

Question 16

Monopolistic competition

Answer 16

Few sellers, many buyers. Big or small firms can compete. Sellers try to make products SEEM different, thus sellers have some control over their prices.

Question 17

Oligopoly

Answer 17

Only handful of very large sellers. Difficult to enter because you need a lot of capital investment to enter. More control over price, but competing companies will usually follow other firm’s price cuts or raise to keep sales.

Question 18

Monopoly

Answer 18

Industry or market has one sole producer. This firm has complete control over the product’s price.

Question 19

Revenue taxes

Answer 19

Taxes to fund various services and programs. (income taxes)

Question 20

Progressive revenue taxes

Answer 20

Taxes that are applied at a higher rate for rich people, and lower rates for poor people.

Question 21

Regressive revenue taxes

Answer 21

Taxes that hold the same rate regardless of a person’s income. (sales taxes)

Question 22

Restrictive taxes

Answer 22

Taxes levied partially for their revenue, but because a governing body wishes to control the products.

Question 23

Government as customers

Answer 23

Buys thousands of different products/services from many firms, most expenditure coming from military purchases.

Question 24

Government as regulator

Answer 24

Regulate to promote competition, achieve social goals, protect customers, and protect the environment.

Question 25

Government as competitor

Answer 25

Competes with businesses through crown corporations. (Hydro-Quebec and Canada Post)