mic

Question 1

What is the problem of scarcity?

Answer 1

Unlimited wants and limited resources require choices about resource allocation.

Question 2

What is opportunity cost?

Answer 2

The next best alternative forgone when making a decision, affecting consumers, producers, and governments.

Question 3

What does a Production Possibility Curve (PPC) show?

Answer 3

The maximum possible output combinations of two goods with available resources.

Question 4

How is the PPC used?

Answer 4

To show maximum potential, employment levels, opportunity costs, economic growth, and unattainable points.

Question 5

What causes economic growth?

Answer 5

Technological progress, increased resources, investment (positive growth); natural disasters, resource depletion (negative growth).

Question 6

What are the basic assumptions about consumers and producers?

Answer 6

Consumers aim to maximize benefit; producers aim to maximize profit.

Question 7

Why might consumers not maximize benefit?

Answer 7

They may struggle to calculate benefits, have habits, or copy others.

Question 8

Why might producers not maximize profit?

Answer 8

Management may prioritize revenue or social goals; they may focus on customer care or charitable work.

Question 9

What is demand?

Answer 9

The quantity consumers are willing and able to buy at various prices.

Question 10

How does the demand curve slope?

Answer 10

Downward, showing that higher prices reduce demand.

Question 11

What causes demand curve shifts?

Answer 11

Advertising, income, tastes, substitutes, complements, demographics.

Question 12

What is supply?

Answer 12

The quantity producers are willing and able to supply at various prices.

Question 13

How does the supply curve slope?

Answer 13

Upward, indicating higher prices incentivize more supply.

Question 14

What causes supply curve shifts?

Answer 14

Changes in production costs, technology, taxes, subsidies, natural factors.

Question 15

How is market equilibrium determined?

Answer 15

Where demand equals supply, establishing the price and quantity.

Question 16

What are excess demand and excess supply?

Answer 16

Excess demand (shortage), excess supply (surplus).

Question 17

What is price elasticity of demand (PED)?

Answer 17

The responsiveness of demand to price changes.

Question 18

What is the PED formula?

Answer 18

PED=% change in quantity demanded/% change in price.

Question 19

What are the PED value categories?

Answer 19

Perfect inelastic (PED=0), Inelastic (0<PED<1), Unitary elastic (PED=1), Elastic (PED>1), Perfect elastic (PED approaches infinity).

Question 20

What factors influence PED?

Answer 20

Availability of substitutes, necessity vs. luxury, income proportion, time.

Question 21

How does PED relate to total revenue?

Answer 21

Elastic demand: Price rise lowers TR; Inelastic demand: Price rise increases TR.

Question 22

What is price elasticity of supply (PES)?

Answer 22

Responsiveness of quantity supplied to price changes.

Question 23

What factors influence PES?

Answer 23

Production flexibility, stocks, spare capacity, time.

Question 24

What is income elasticity of demand (YED)?

Answer 24

Responsiveness of demand to income changes.

Question 25

What do different YED values indicate?

Answer 25

Luxury goods (YED>1), Normal goods (YED>0<1), Inferior goods (YED<0).

Question 26

What is a mixed economy?

Answer 26

An economy combining private and public sector involvement.

Question 27

What are the public and private sectors?

Answer 27

Public sector: government-owned; private sector: privately owned.

Question 28

How are economic problems solved in a mixed economy?

Answer 28

Through market forces and government intervention.

Question 29

What is market failure?

Answer 29

When resources are allocated inefficiently.

Question 30

What are public goods?

Answer 30

Non-excludable and non-rivalrous goods, leading to free rider problems.

Question 31

What is privatisation?

Answer 31

Transferring ownership from government to private firms to improve efficiency.

Question 32

What are external costs?

Answer 32

Negative side effects of production or consumption not reflected in prices (e.g., pollution).

Question 33

What are external benefits?

Answer 33

Positive spillovers (e.g., education, healthcare).

Question 34

How are social costs and benefits calculated?

Answer 34

Social costs = Private costs + External costs; Social benefits = Private benefits + External benefits.

Question 35

What are the factors of production?

Answer 35

Land, labour, capital, enterprise.

Question 36

What are the main sectors of the economy?

Answer 36

Primary (raw materials), secondary (manufacturing), tertiary (services).

Question 37

How do sectors change over time?

Answer 37

Shifts in employment and output reflect economic development.

Question 38

What is productivity?

Answer 38

Output per worker or resource used.

Question 39

What factors affect productivity?

Answer 39

Technology, skills, capital investment, education.

Question 40

What is division of labour?

Answer 40

Specialization of tasks to increase efficiency.

Question 41

What are the advantages and disadvantages of division of labour?

Answer 41

Advantages: Increased efficiency, faster production; Disadvantages: Monotony, dependency on specific tasks.

Question 42

How are costs and profits calculated?

Answer 42

Total revenue = Price × Quantity; Total costs = Fixed + Variable costs; Profit = Revenue - Costs.

Question 43

What are economies of scale?

Answer 43

Cost advantages from increased production; internal (within firm) or external (industry-wide).

Question 44

What are diseconomies of scale?

Answer 44

Rising average costs due to inefficiencies at large sizes.

Question 45

What is the long-run average cost (LRAC) curve?

Answer 45

Shows the lowest possible cost at each output level, illustrating economies/diseconomies of scale.

Question 46

What are types of market structures?

Answer 46

Monopoly: One firm, high barriers, price-maker; Oligopoly: Few firms, potential collusion, non-price competition; Perfect competition: Many firms, identical products, price-taker.

Question 47

What influences firm growth?

Answer 47

Government regulation, finance, economies of scale, risk spreading, mergers.

Question 48

Why do some firms stay small?

Answer 48

Market size, niche markets, limited finance, entrepreneur goals.

Question 49

What is a monopoly?

Answer 49

A market dominated by a single firm with barriers to entry and price-setting power.

Question 50

What are the features of an oligopoly?

Answer 50

Few firms, similar or different products, barriers to entry, collusion, price/ non-price competition.

Question 51

What factors affect the demand for labour?

Answer 51

Demand for final product, substitutes (machines), productivity.

Question 52

What factors influence the supply of labour?

Answer 52

Population, migration, age, education, skills, geographic mobility.

Question 53

How does trade union activity impact the labour market?

Answer 53

Can improve wages and working conditions through negotiations.

Question 54

How does government intervene in externalities?

Answer 54

Taxes, subsidies, fines, regulation, pollution permits.

Question 55

What is the purpose of government regulation of competition?

Answer 55

To promote competition, limit monopoly power, protect consumers, control mergers.

Question 56

Why does the government set minimum wages?

Answer 56

To prevent exploitation, reduce poverty, and improve living standards.