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ECON 1100 Chapter Notes - Chapter 1: Planned Economy, Allocative Efficiency, Normative Economics

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22 Jan 2020

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Three key economic ideas: people are rational, people respond to incentives, optimal decisions are made at the margin. A marginal analysis involves comparing marginal benefits and costs. In a centrally planned economy the government decides how economic resources will. In a market economy the decisions of households and firms interacting in markets. In a mixed economy most economic decisions result from interactions of buyers and allocate economic resources be allocated sellers in markets, the government plays a significant role in the allocation of resources possible cost. Productive efficiency occurs when a good or service is produced at the lowest. Allocative efficiency occurs when production is in accordance with consumer. Voluntary exchange is when both the buyer and seller are made better off by the preferences transaction. Models allow people to focus on the interactions of two or more things. An economic variable is something measurable that can have different values.

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Related Questions

Which of the following is a correct statement about a mixed economy?

1. Firms determine how goods and services will be produced.

2. In a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources.

3. The government takes no part in the economy.

salmonraccoon110

The idea of efficiency often arises when measuring a society's well-being. There are two kinds of efficiency: productive efficiency and allocative efficiency.

What can the government do to promote allocative efficiency?

(i) Allocate resources so that all types of goods and services are produced in the same amount.

(ii) Allocate all resources to maximize the production of the one product most desired by society.

(iii) Take responsibility for distributing resources equally among the rich and the poor, regardless of people's preferences.

(iv) Impose a minimum of interference in the market, thus enabling the people who are willing to pay the most for a given good or service to obtain it.

ultramarinerabbit662

Part 1.Choose the correct answer of the following:

1.In a market economy, economic activity is guided by

a.Self-interest and prices

b.The government.

c.Corporations.

d. Central planners.

2. Which of the following decisions must be made by all economies?

a.How much to produce? When to produce? How much does it cost?

b.What to produce? How to produce? For whom to produce?

c.What is the price? Who will produce it? Who will consume it?

d. None of the above

3.Since the resources used in the production of goods and services are limited, society must:

a.Reduce the use of those resources

b.Try to get more resources

c.Make choices about how to use resources

d.Focus on their most abundant resource

4.Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

a.Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

b.There is no such thing as a free lunch.

c.People buy more when prices are low than when prices are high.

d. No matter how much people earn, they tend to spend more than they earn.

5.If real GDP increased by 2 percent, then

a.Government spending increased by 2 percent

b.The price level has increased by 2 percent

c.Real output/production has increased by 2 percent

d. The increase might have been caused by an increase in the price level or output, but we cannot tell for sure

6. Which of the following would show an efficient economy?

a.Uses the least costly amount of resources available

b.Has a small amount of people who do not work

c.Resources are used to make the most goods and services possible

d.None of the above

7.What is the type of unemployment that occurs when people take time to find a job?

a.cyclical

b.frictional

c.Disguised

d.structural

emeraldoyster872