nature of econ

Question 1

What is the basic economic problem

Answer 1

We have infinite wants and needs but have scarce resources

Question 2

Define opportunity cost

Answer 2

Measure the cost of a choice made in terms of the next best alternative forgone

Question 3

what does PPF stand for

Answer 3

Production Possibility Frontier

Question 4

what does ppf mean

Answer 4

it is the maximum potential output of an economy producing a combination of 2 goods that can be produced with all the factor resources being used efficiently

Question 5

what part of the ppc would you see opportunity cost

Answer 5

the top block, there will be less capital goods

Question 6

what part of the ppc would you see gain

Answer 6

the side block, more consumer goods

Question 7

what does a point not being on the actual curve mean

Answer 7

that resources are unemployed

Question 8

what does it mean when the ppc shifts outwards

Answer 8

there’s economic growth (increase in gdp)

Question 9

what does it mean when the ppc shifts inwards

Answer 9

there’s economic loss (decrease in gdp)

Question 10

what causes the ppc to shift outwards

Answer 10

increasing size of production, increasing quality, increasing labor force by migration or training or more

Question 11

what causes the ppc to shift inwards

Answer 11

mass loss of life such as natural disaster or pandemic, migration out of the country, less demand, less labor force ect

Question 12

when the point is inside the curve rather than on the curve what does this mean

Answer 12

there is an insufficient use of resources which could be cause by unemployment, IDLE factories and more

Question 13

what does a curved ppc show

Answer 13

that the opportunity cost rises as you move around the ppf because as resources get reallocated they become less suitable for the production of other goods

Question 14

what does a straight line ppf show

Answer 14

that the output of capital good is directly proportional to the output of consumer goods

Question 15

how to work out opportunity cost per unit

Answer 15

opportunity cost/gain

Question 16

define specialization

Answer 16

when people businesses or countries focus on one particular activity leading to improved productivity

Question 17

define division of labor

Answer 17

the breaking down of a big task into smaller segments which people specialize in

Question 18

what is a benefit of division of labor to firms

Answer 18

they have more efficiency in production and this allows quicker production so more sales, decrease cost per unit which increase prices

Question 19

define productivity

Answer 19

how much of something that can be made with one unit of input

Question 20

what is free market economy

Answer 20

it is an economy where there is a low amount of government intervention and the private sector dominates and they are driven by the profit motive

Question 21

what is a mixed economy

Answer 21

it is an economy that has government intervention but also private ownership, mix of free economy and command economy

Question 22

what is a planned economy

Answer 22

the economy which a centralized government controls the means of production and determines outputs

Question 23

who is adam smith

Answer 23

he is the first official economist and he believed in free market and that there should be less state intervention

Question 24

what are economic actors

Answer 24

consumers, employers, employees ect…

Question 25

advantages of free market competition

Answer 25

efficient allocation of scarce resources, competitive prices, increased consumer choice, capital investment

Question 26

what does resource allocation occur through

Answer 26

price mechanism

Question 27

what is price mechanism

Answer 27

fluctuating in prices and it determines everything and is a signal for firms to supply less or more

Question 28

what is market mechanism

Answer 28

the decision of what is need to be produced

Question 29

what determines what needs to be produced

Answer 29

consumers who are in sovereign (leading)

Question 30

what is the role of the government

Answer 30

establish public goods, issues of money,. law legal ownership, protect property and ideas, step in if markets fail

Question 31

drawbacks of free market

Answer 31

income and wealth inequality, businesses have monopoly power which leads to higher prices, negative environmental impact and under or non-provision of public goods and services

Question 32

what is a positive statement

Answer 32

can be proven with data and is a fact

Question 33

what is a normative statement

Answer 33

value based judgment and isn’t based on data

Question 34

what did karl marx believe

Answer 34

that equality is important as there is an unequal struggle between owners of capital and labor and that there is massive inequality in free market

Question 35

what does karl marx say about all earning the same

Answer 35

that if we all earn the same there will be no incentive (use doctors and sales assistants as a comparative example)

Question 36

benifit of karl max ideology

Answer 36

more equality of income, access to services not dependent on income and more strong public services

Question 37

drawback of karl marx ideology

Answer 37

the state can suffer from information failures and corruption, problems in choosing prices or goods and services

Question 38

what is the role of the state in a mixed economy

Answer 38

state owned industries and welfare state

Question 39

what is public goods

Answer 39

causes market failure due to the problem of missing markets

Question 40

what is non excludable

Answer 40

benifits derived from pure public goods cannot be confined sole to those who have paid for it (eg beaches, parks ect…)

Question 41

what is non rivalrous

Answer 41

each partys enjoyments of using the goods or service doesn’t diminish others enjoyment (broadcast, sun ect…)

Question 42

what is non rejectable

Answer 42

it cannot be rejected by people

Question 43

what is free rider

Answer 43

where non payers can enjoy the benefits of consumption at no financial cost of themselves