Theme 1 (MR SLATTERY)

Question 1

What are the four factors of production?

Answer 1

• capital
• enterprise
• labour
• land

Question 2

What are the advantages of division of labour?

Answer 2

• increased productivity
• makes full use of resources
• lower costs as reduced training time

Question 3

What are the disadvantages of division of labour?

Answer 3

• boredom
• strikes
• no cover
• no one else can do that job

Question 4

What are the advantages of country specialisation?

Answer 4

• makes full use of all resources
• increases output
• improves the quality

Question 5

What are the disadvantages of country specialisation?

Answer 5

• what if there’s world recession?
• overuse of natural resources

Question 6

What did Karl Marx believe in economics?

Answer 6

That value of a produced good can be measured by the average number of labour hours required to produce it

Question 7

What are some advantages of Karl Marx’s theory?

Answer 7

• higher wage
• reduces poverty

Question 8

What are some disadvantages of Karl Marx’s theory?

Answer 8

• rewarding laziness
• inflation

Question 9

What did Adam Smith believe about economics?

Answer 9

An individual would invest a resource so as to earn the highest possible return on it

Question 10

What are some advantages of Adam Smith’s theory?

Answer 10

• market would always produce what the consumers want
• rewards the effort

Question 11

What are some disadvantages of Adam Smith’s theory?

Answer 11

• cuts off the poor
• encourages demerit goods

Question 12

What did Hayek believe about economics?

Answer 12

The government always makes things worse when they get involved in markets

Question 13

What are some advantages of subsides?

Answer 13

• lowers production costs
• solves underproduction

Question 14

What are some disadvantages of subsides?

Answer 14

• opportunity costs
• taxation
• rewards laziness (inefficiency)

Question 15

What are some advantages of maximum pricing?

Answer 15

• lower consumer prices
• increased efficiency

Question 16

What are some disadvantages of maximum pricing?

Answer 16

• takes the product off the market
• excess money could be used for other things (bad)

Question 17

What are some advantages of minimum pricing?

Answer 17

• reduces consumption
• correcting market failure
• increases the price that producers receive

Question 18

What are some disadvantages of minimum pricing?

Answer 18

• consumers will be paying more
• resources are allocated inefficiently

Question 19

What are some advantages of carbon trading?

Answer 19

• revenue source for the government
• cost effective

Question 20

What are some disadvantages of carbon trading?

Answer 20

• extra costs gets pushed onto consumers
• businesses can move to other countries

Question 21

What are some advantages of carbon offsetting?

Answer 21

• saves species from extinction
• improves public image

Question 22

What are some disadvantages of carbon offsetting?

Answer 22

• potentially worthless
• not a fix all solution

Question 23

What are some advantages of the congestion charge?

Answer 23

• controls congestion on the roads
• reduces pollution

Question 24

What are some disadvantages of congestion charge?

Answer 24

• may harm low-income people rather than high income people
• economic burden faced by the community

Question 25

How to calculate the opportunity cost?

Answer 25

Return on next best alternative - return on chosen option

Question 26

How are resources allocated in free economies?

Answer 26

Through supply and demand

Question 27

How are resources allocated in command economies?

Answer 27

Centrally by the government

Question 28

How are resources allocated in mixed economies?

Answer 28

Through market mechanism and government intervention

Question 29

Why do free economies exist?

Answer 29

- private ownership - freedom of choice

Question 30

Why do mixed economies exist?

Answer 30

- balance efficiency and social welfare - addressing market failures

Question 31

Why do command economies exist?

Answer 31

- social welfare and equity - economic development

Question 32

What can cause the consumer surplus to increase?

Answer 32

- decreased price - decreased demand - increased supply

Question 33

What can cause the consumer surplus to decrease?

Answer 33

- increased price - increased demand - decreased supply

Question 34

What can cause the producer surplus to increase?

Answer 34

- increased demand - increased supply - decreased competition - decreased taxes

Question 35

What can cause the producer surplus to decrease?

Answer 35

- decreased demand - decreased supply - increased competition - increased taxes

Question 36

What are some advantages of externalities?

Answer 36

- increased productivity - increased innovation - improved resource allocation

Question 37

What are some disadvantages of externalities?

Answer 37

- reduced efficiency - market failure

Question 38

What are some advantages of taxes?

Answer 38

- funding of public goods and services - reduce income inequality

Question 39

What are some disadvantages of taxes?

Answer 39

- reduced incentives - taxation evasion

Question 40

What are some advantages of government intervention?

Answer 40

- correcting market failure - economic growth

Question 41

What are some disadvantages of government intervention?

Answer 41

- inefficiency - opportunity costs

Question 42

What are some advantages of production possibility frontier?

Answer 42

- illustrating opportunity cost - assessing economic growth

Question 43

What are some disadvantages of production possibility frontier?

Answer 43

- simplification - focuses on production, not consumption