Economic Sytems & Allocation Of Reasources

Question 1

What does ‘economic structure’ refer to?

Answer 1

The way in which an economy is made up of different sectors

Question 2

What is the primary sector focused on?

Answer 2

Natural resources and the farming, mining, and general extraction of these resources

Question 3

What activities are included in the secondary sector?

Answer 3

Manufacturing and the transformation of resources into goods, such as car manufacturing and food processing

Question 4

What does the tertiary sector encompass?

Answer 4

Services ranging from hairdressing to financial services

Question 5

What is the quaternary sector about?

Answer 5

Knowledge and the use of information, including research and development companies and IT firms

Question 6

As economies develop, what changes in their reliance on sectors?

Answer 6

Their reliance on different economic sectors also develops

Question 7

True or False: Some developed countries may still have a heavy influence of the primary sector.

Answer 7

True

Question 8

What are the three key economic questions that arise from scarcity?

Answer 8

What, how, and who to produce for

Question 9

How does the economic system affect resource allocation?

Answer 9

It largely depends on the economic system in place

Question 10

What is a market economy?

Answer 10

An economic system where decisions on resource allocation are based on demand and supply

Question 11

In a market economy, who decides how to allocate resources?

Answer 11

The private sector

Question 12

Fill in the blank: In a market economy, resources are allocated on the basis of _______.

Answer 12

price

Question 13

What are some advantages of a market economy?

Answer 13

• Efficiency
• Freedom of choice
• Incentives for hard work

Question 14

What are some disadvantages of a market economy?

Answer 14

• Environmental issues
• Inequality
• Social problems

Question 15

What does a planned economy entail?

Answer 15

An economic system where the government makes all decisions regarding resource allocation

Question 16

What are the characteristics of a market economy?

Answer 16

• High levels of competition
• Goods and services sold to those willing and able to pay
• Unprofitable goods are not produced

Question 17

True or False: In a market economy, the government influences how resources are allocated.

Answer 17

False

Question 18

What is the primary principle of a market economy?

Answer 18

Sold to those who are willing and able to pay

This system is characterized by high levels of competition leading to consumer benefits.

Question 19

What happens to anything deemed unprofitable in a market economy?

Answer 19

It will not be produced

This reflects the profit-driven nature of market economies.

Question 20

What type of economy was closest to a pure market economy before 1997?

Answer 20

Hong Kong

Hong Kong operated under a free market system until its return to Chinese sovereignty.

Question 21

What is another name for a planned economy?

Answer 21

Socialist or Command system

This term reflects the government’s control over economic decisions.

Question 22

Name three examples of planned economies.

Answer 22

• USSR
• North Korea
• Cuba

China was also included until recent reforms.

Question 23

Who answers the three economic questions in a planned economy?

Answer 23

The government

They determine what is produced, how it is produced, and for whom it is produced.

Question 24

What is the main belief underlying a planned economy?

Answer 24

Equality

Wages are paid almost equally regardless of role within the system.

Question 25

What is a primary characteristic of international trade in a planned economy?

Answer 25

Very little international trade ## Footnote The government prefers to be self-sufficient.

Question 26

What is one advantage of a planned economy regarding resource management?

Answer 26

Prevents wastage ## Footnote The state aims to produce only what is necessary to protect scarce resources.

Question 27

How does a planned economy promote social equality?

Answer 27

By meeting everyone's basic needs ## Footnote This includes access to education, healthcare, employment, and housing.

Question 28

What is an advantage of economies of scale in a planned economy?

Answer 28

Higher levels of efficiency ## Footnote Large scale national suppliers contribute to this efficiency.

Question 29

What is a disadvantage of a planned economy related to consumer choice?

Answer 29

Lack of freedom ## Footnote Individuals have no real choice in what to buy or sell.

Question 30

What is the incentive structure in a planned economy?

Answer 30

No incentive ## Footnote There is no motivation to work harder for more pay or status.

Question 31

What is a practical issue faced in a planned economy regarding food supply?

Answer 31

Long queues for food ## Footnote Food is heavily subsidized, leading to excess demand relative to supply.

Question 32

What defines a mixed economy?

Answer 32

Combination of market and planned economies ## Footnote The level of government involvement varies.

Question 33

What role does the government play in a mixed economy?

Answer 33

Provides essential services ## Footnote This includes merit goods like education and healthcare.

Question 34

What is the primary purpose of the government in a mixed economy?

Answer 34

Redistribute income ## Footnote This is done through social welfare and pension systems.

Question 35

What motivates private sector businesses in a mixed economy?

Answer 35

Profit motive ## Footnote Unlike the public sector, private businesses aim to make profits.

Question 36

What is a common characteristic of mixed economies in developed countries?

Answer 36

Most popular type of economy ## Footnote This system is prevalent in the developed and western world.

Question 37

What challenge do developing economies face when transitioning from a planned economy?

Answer 37

Issues of transition when central planning is reduced ## Footnote Many have roots in planned economies but benefit from loosening control.

Question 38

What does the World Bank encourage for developing economies?

Answer 38

Freedom in markets ## Footnote This is essential for their economic development and a requirement for EU membership.