Unit 2 test

Question 1

Describe a traditional economy.

Answer 1

economic system in which the allocation of scarce resources and other economic activities are based on ritual, Habit, and Custom

Question 2

Give examples of a traditional economy.

Answer 2

INUIT,AMISH,AMAZONIAN

Question 3

What are advantages and disadvantages of a traditional economy.

Answer 3

ADV: stable and predictable.
DIS: limited innovation, lack of choice, inneficiency, (pretty much no freedom to do anything)

Question 4

who makes the key decisions in a command economy?

Answer 4

The Government

Question 5

Explain a few key characteristics of command economies.

Answer 5

Centralized Planning, State Ownership, Lack of Competition, Limited consumer choice, and resource allocation.

Question 6

what are the advantages and disadvantages of a command economy?

Answer 6

ADV: centralized planning- coordinated and strategic allocation of resources, Long-term planning
DIS: Lack of incentives, inefficiency, red tape

Question 7

Give four characteristics of Market economies.

Answer 7

Private ownership, Market forces, flexibility, variety of goods and services, decentralized decision-making, market forces, competition, etc.

Question 7

Name a few examples of command economies over the ages.

Answer 7

Soviet Union, Maoist china, North Korea

Question 8

How are decisions made in a market economy?

Answer 8

the producer gets to decide what to produce, how much to produce, what to charge customers for those goods, and what to pay employees

Question 9

Name a few disadvantages of Market economies

Answer 9

Income inequality, market failures, lack of social safety nets, short-term focus, instability, unemployement

Question 9

What are other names for market economies?

Answer 9

free Market Economies, laissez-Faire economies, liberal economies, free enterprise economies, capitalist economy

Question 10

Name five advantages of Market economies.

Answer 10

Efficiency, innovation, consumer choice, flexibility and higher productivity

Question 11

Describe capitalism

Answer 11

an economic system where private citizens own the factors of production

Question 12

Name two notable Asian market economies

Answer 12

singapore and hongkong

Question 13

Describe socialism

Answer 13

a mixed economic and political system in which the government owns and controls some but not all of the basic productive resources

Question 13

Name a few key details on mixed economies.

Answer 13

MOST COUNTRIES USE MIXED ECONOMIES. some have a political system, some do not.

Question 14

Name a few ways in which the US is a mixed economy.

Answer 14

regulation, antitrust laws, social safety nets, education, environmental protection, monetary policy, research, public goods and services

Question 14

Describe “Communism”.

Answer 14

an extreme version of socialism in which all property is collectively owned

Question 15

Give a few key details on the thoughts and ideas of Adam Smith.

Answer 15

Scottish philosopher, wrote Wealth of Nations in 1776, Invisible Hand- individuals pursuing their self-interest in a competitive market unintentionally promote the well-being of society as a whole.
-Division of labor
- free market capitalism
- role of government

Question 15

Give a few key details on the thoughts and ideas of Karl Marx.

Answer 15

German philosopher, economist, and political theorist, “the communist manifesto” class struggle- argued that society is fundamentally divided into 2 main classes: the bourgeoisie and the proletariat

Question 16

What questions are asked when considering “Market structure”?

Answer 16

1.How much control over price does each firm have?
2.How many firms are competing in the market?
3.How large/what size are each of the firms?
4.What are the characteristics of the products in each market?
5.How easy is it for new firms to enter the market?

Question 16

Compare and contrast John Maynard Keynes vs. Milton Friedman

Answer 16

John- British economist who
revolutionized economic thought during the 20th century. He
argued that during recessions, governments should increase public
spending and lower interest rates to stimulate demand and boost
employment. ilton Friedman: American economist known for his advocacy of free-market capitalism and monetarism. He believed in limited government intervention in the economy and argued that the primary role of
government should be to maintain a stable money supply to prevent
inflation. they had opposing thoughts

Question 17

Explain monopolistic competition

Answer 17

the market structure that has all the conditions of perfect competition except for
identical products
EX: fast food chains, sports apparel, streaming services, and retail clothing brands

Question 17

Explain “perfect competition”

Answer 17

not existent. markets where buyers and sellers exchange identical products
EX:agricultural or produce products

Question 18

Explain oligopolies

Answer 18

market structure in which a few large sellers dominate the industry

Question 19

Give examples of oligopolies,

Answer 19

telecommunications
automakers
oil and gas
credit card companies

Question 20

What are monopolies?

Answer 20

market with one seller

Question 21

What US law is associated with the beginnings of regulating monopolies?

Answer 21

Sherman antitrust acts

Question 22

Name a few examples of “Antitrust suits” against monopolistic tactics.

Answer 22

standard oil company
AT&T
Microsoft

Question 23

What are three examples of legal monopolies?

Answer 23

Natural
Geographic
Technological

Question 24

Explain why nations trade

Answer 24

Achieve a variety of goods.
to acquire goods and services.
benefits of specialization

Question 25

Explain comparative advantage.

Answer 25

when a country is relatively better at making a product

Question 26

Explain absolute advantage

Answer 26

when a country is better than another country at making a product

Question 27

Describe the impact of NAFTA and now USMCA.

Answer 27

NAFTA: trade agreement in the 1990’s between USA/CAN/MEX
USMCA: Trump-era extension of NAFTA
Debates over free trade vs. protectionism

Question 27

List important imports/exports of the US.

Answer 27

IMPORTS: clothing, home goods, electronics
EXPORTS: chemicals, agricultural products, pharmaceuticals