Microeconomics L5-7

Question 1

Define specialisation

Answer 1

Specialisation occurs when an individual, firm, region or countries concentrates on the production of a limited range of goods and services

Question 2

Define division of labour

Answer 2

The specialisation of workers on specific tasks in the production process

Question 3

Equation for productivity

Answer 3

Output produced/ total inputs used

Question 4

What does increased productivity lead to:

Answer 4

• higher output and higher quality
• higher living standards
• more efficient use of resources

Question 5

Advantages of the division of labour

Answer 5

• workers become more skilled through repetition
• productivity of workers rises so output increases
• time saved by workers focussing on narrow range of tasks
• workers are easier and cheaper to train

Question 6

Benefits of division of labour for firms and workers

Answer 6

Firms: greater quantity and higher quality of output
Workers: higher skill levels and potentially higher wages

Question 7

Disadvantages of division of labour

Answer 7

• repetition of tasks can lead to boredom, morale drop

- simplified job tasks can reduce pride workers feel in jobs

Question 8

Advantages of specialisation

Answer 8

• better quality and higher quantity of products
• more efficient use of scarce resources
• higher trade with other countries
• higher economic growth -> higher living standards

Question 9

Main benefit of specialisation for economy

Answer 9

Higher growth and living standards

Question 10

Disadvantages of specialisation

Answer 10

• over-reliance on a few industries is risky

- increased interdependence reduces self- sufficiency

Question 11

Define planning

Answer 11

Refers to the process by which a government allocates resources, funded through taxation

Question 12

Define market

Answer 12

Anywhere buyers and sellers exchange goods and services , physical or digital

Question 13

Define price mechanism

Answer 13

The process by which the market allocates resources

Question 14

What are the three types of economy

Answer 14

Command economy, mixed economy, free market economy

Question 15

Define command economy

Answer 15

An economy in which resources are allocated solely by the state

Question 16

Define mixed economy

Answer 16

An economy in which resources are allocated by the state and the price mechanism

Question 17

Define free market economy

Answer 17

An economy in which resources are allocated solely by the price mechanism

Question 18

Define public sector

Answer 18

The part of an economy which is controlled or owned by the government

Question 19

Define private sector

Answer 19

The part of the economy which is not controlled or owned by the government

Question 20

Why does having a profit motive lead to wider choice.?

Answer 20

Incentivises firms to:
develop new products
Firms to meet consumer demands

Question 21

Why is there limited choice in command economics

Answer 21

Profit motive is absent and firms are told what to produce

Question 22

What can limit choice in free market and mixed economies?

Answer 22

Concentrated markets and monopolies

Question 23

Why are quality and innovation Higher in mixed and free market economies

Answer 23

Because competition and profit motive are present

Question 24

Define efficiency

Answer 24

Concerned with the optimal production and distribution of these scarce resources

Question 25

Why are mixed and free economies more efficient than command economies

Answer 25

Command economies lack competition and profit motive

Question 26

Why do free market and mixed economies have a less equitable distribution of income and wealth than command economies?

Answer 26

Owners of capital and land accumulate wealth over time and pass privilege on to their children through property, education and social networks

Question 27

How would command economies lack equitablity

Answer 27

Eg. In communist countries, higher income and power have access to better school and health care

Question 28

What three things is the state made up of

Answer 28

Territory, citizens and government

Question 29

What does a government do

Answer 29

Rules over a state at a given time

Question 30

Difference between state and government

Answer 30

State = permanent, made of citizens | Government is not permanent or made of citizens

Question 31

What is the role of the state in mixed economy

Answer 31

- allocates resources through planning - redistributes incomes through welfare spending - regulates consumers and firms