Chapter 1.2

Question 1

Three basic economic questions

Answer 1

What/how much to produce
How to produce
For who to produce

Question 2

Resource allocation

Answer 2

Assigning available resources, or factors of production, to specific uses chosen among many possible alternatives

Question 3

What does government intervention do regardless of type or reason?

Answer 3

Changes the allocation of resources from what markets would have achieved working on their own

Question 4

Free market economy

Answer 4

Based on the market approach without intervention

Question 5

Planned economy

Answer 5

Based on the command approach with intervention

Question 6

Resource ownership in a free market economy

Answer 6

Private sector ownership

Question 7

Resource ownership in a planned economy

Answer 7

Public sector resource ownership

Question 8

Economic decision-making in a free market economy

Answer 8

Private sector economic decision-making

Question 9

Economic decision-making in a planned economy

Answer 9

Public sector economic decision-making

Question 10

Rationing

Answer 10

A method used to apportion or divide something up between its interested users

Question 11

Rationing in the free market economy

Answer 11

Price rationing

Question 12

Rationing in the planned economy

Answer 12

Non-price rationing