All flashcards
Flashcard 1: What is the invisible hand?
Answer: The unseen forces that move the free market economy. Adam Smith's concept of self-interest guiding efficient market outcomes.
Flashcard 2: Which economic system combines elements of market and command economies?
Answer: Mixed economy. Uses both market mechanisms and government planning for allocation.
Flashcard 3: Identify the primary economic systems.
Answer: Traditional, Command, Market, Mixed. These represent the four main ways societies organize production and distribution.
Flashcard 4: Identify the primary economic systems.
Answer: Traditional, Command, Market, Mixed. These represent the four main ways societies organize production and distribution.
Flashcard 5: What is the role of government in a market economy?
Answer: Minimal, mainly to enforce laws and protect property rights. Government provides framework but avoids direct economic control.
Flashcard 6: What is the primary goal of economic efficiency?
Answer: Maximize output with given resources. Achieve maximum production from available resources without waste.
Flashcard 7: Identify a policy tool for correcting negative externalities.
Answer: Pigovian tax. Tax on activities that create negative externalities to reduce them.
Flashcard 8: What is the primary goal of economic efficiency?
Answer: Maximize output with given resources. Achieve maximum production from available resources without waste.
Flashcard 9: Identify a policy tool for correcting negative externalities.
Answer: Pigovian tax. Tax on activities that create negative externalities to reduce them.
Flashcard 10: Describe a traditional economy.
Answer: A traditional economy is based on customs, history, and time-honored beliefs. Decisions follow established cultural practices passed down generations.
Flashcard 11: Which economic system is most likely to promote innovation?
Answer: Market economy. Competition and profit incentives drive entrepreneurship and creativity.
Flashcard 12: How does a mixed economy allocate resources?
Answer: Through both market forces and government intervention. Combines price signals with government regulation and planning.
Flashcard 13: Which economic system is most likely to have public ownership of resources?
Answer: Command economy. Government typically owns and controls major industries and resources.
Flashcard 14: Identify one factor that can shift a PPF outward.
Answer: Technological advancement. Improves productivity, allowing more output from same inputs.
Flashcard 15: What is the primary function of money in an economy?
Answer: Medium of exchange. Facilitates trade by eliminating need for direct barter.
Flashcard 16: What is the main disadvantage of a command economy?
Answer: Lack of incentives for productivity and innovation. Without profit motive, workers and managers lack efficiency incentives.
Flashcard 17: Identify the main advantage of a command economy.
Answer: It can quickly mobilize resources. Central control enables coordinated response to national priorities.
Flashcard 18: What characterizes a command economy?
Answer: In a command economy, the government makes all economic decisions. Central planners control what, how, and for whom goods are produced.
Flashcard 19: What characterizes a command economy?
Answer: In a command economy, the government makes all economic decisions. Central planners control what, how, and for whom goods are produced.
Flashcard 20: Which economic system uses central planning?
Answer: Command economy. Government agencies coordinate all production and distribution decisions.
Flashcard 21: In which system are prices most flexible?
Answer: Market economy. Supply and demand forces allow rapid price adjustments.
Flashcard 22: What is the definition of an economic system?
Answer: An economic system is an organized way a society allocates resources and distributes goods and services. Shows how societies decide who gets what, when, and how.
Flashcard 23: Which system encourages consumer sovereignty?
Answer: Market economy. Consumer demand directly influences production decisions through prices.
Flashcard 24: How does a mixed economy allocate resources?
Answer: Through both market forces and government intervention. Combines price signals with government regulation and planning.
Flashcard 25: Identify one factor that can shift a PPF outward.
Answer: Technological advancement. Improves productivity, allowing more output from same inputs.
Flashcard 26: What is a Production Possibility Frontier (PPF)?
Answer: A curve depicting maximum feasible amounts of two products that a nation can produce. Shows trade-offs between different production possibilities given resources.
Flashcard 27: Describe a traditional economy.
Answer: A traditional economy is based on customs, history, and time-honored beliefs. Decisions follow established cultural practices passed down generations.
Flashcard 28: Which economic system is based on supply and demand?
Answer: Market economy. Price mechanism coordinates production and consumption decisions.
Flashcard 29: What does a point inside the PPF indicate?
Answer: Inefficient resource use. Resources are not being used to their full potential.
Flashcard 30: Which economic system combines elements of market and command economies?
Answer: Mixed economy. Uses both market mechanisms and government planning for allocation.
Flashcard 31: Identify the main advantage of a command economy.
Answer: It can quickly mobilize resources. Central control enables coordinated response to national priorities.
Flashcard 32: What is the main disadvantage of a market economy?
Answer: It can result in economic inequalities. Income distribution depends on market success rather than need.
Flashcard 33: State one advantage of a traditional economy.
Answer: Stability and predictability. Established patterns provide security and reduce uncertainty.
Flashcard 34: Define consumer sovereignty.
Answer: The power of consumers to decide what gets produced. Consumer choices determine which goods and services are produced.
Flashcard 35: Identify a consequence of an economic system with no private property.
Answer: Lack of individual incentives. People have no personal stake in improving productivity or efficiency.
Flashcard 36: What role do prices play in a market economy?
Answer: Prices signal resource allocation. Higher prices indicate greater demand or lower supply for resources.
Flashcard 37: What is an externality?
Answer: An externality is a consequence of an economic activity experienced by unrelated third parties. Costs imposed on others not involved in the economic transaction.
Flashcard 38: State the formula for calculating opportunity cost.
Answer: Opportunity Cost = Next Best Alternative Foregone. The value of the best alternative choice that must be given up.