Economics Fundamentals
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Questions and Answers

What is the fundamental economic problem that arises due to unlimited wants and needs, but limited resources?

  • Scarcity (correct)
  • Law of Supply
  • Opportunity Cost
  • Law of Demand

    • What is the primary difference between absolute advantage and comparative advantage?

  • Absolute advantage focuses on efficiency, while comparative advantage focuses on opportunity cost. (correct)
  • Absolute advantage is a short-term concept, while comparative advantage is a long-term concept.
  • Absolute advantage is a characteristic of command economies, while comparative advantage is a characteristic of market economies.
  • Absolute advantage refers to the production of goods, while comparative advantage refers to the production of services.

    • What is the term for the value of the next best alternative given up when a choice is made?

  • Law of Supply
  • Market Equilibrium
  • Law of Demand
  • Opportunity Cost (correct)

    • What is the primary purpose of imposing tariffs on imported goods?

    <p>To protect domestic industries</p> Signup and view all the answers

    What is the term for the point at which the quantity demanded equals the quantity supplied?

    <p>Market Equilibrium</p> Signup and view all the answers

    Which economic system is characterized by a combination of market and command economy elements?

    <p>Mixed Economy</p> Signup and view all the answers

    What is the term for a market structure in which there is a single firm, barriers to entry, and a unique product?

    <p>Monopoly</p> Signup and view all the answers

    What is the primary benefit of international trade?

    <p>Increased efficiency and variety of goods and services</p> Signup and view all the answers

    What is the term for an increase in the production of goods and services in an economy over time?

    <p>Economic Growth</p> Signup and view all the answers

    What is the primary characteristic of a command economy?

    <p>Government allocation of resources</p> Signup and view all the answers

    What is the term for the actions of a central bank to control the money supply and interest rates?

    <p>Monetary Policy</p> Signup and view all the answers

    Which economic system is characterized by state or worker ownership of the means of production?

    <p>Socialism</p> Signup and view all the answers

    Study Notes

    Microeconomics

    • Scarcity: The fundamental economic problem of unlimited wants and needs, but limited resources.
    • Opportunity Cost: The value of the next best alternative given up when a choice is made.
    • Law of Demand: As the price of a good increases, the quantity demanded decreases, ceteris paribus.
    • Law of Supply: As the price of a good increases, the quantity supplied increases, ceteris paribus.
    • Market Equilibrium: The point at which the quantity demanded equals the quantity supplied.
    • Types of Markets:
      • Perfect Competition: Many firms, free entry and exit, identical products.
      • Monopoly: Single firm, barriers to entry, unique product.
      • Monopolistic Competition: Many firms, free entry and exit, differentiated products.
      • Oligopoly: Few firms, interdependent decision-making, non-price competition.

    Macroeconomics

    • Gross Domestic Product (GDP): The total value of goods and services produced within a country's borders.
    • Economic Growth: An increase in the production of goods and services in an economy over time.
    • Inflation: A sustained increase in the general price level of goods and services in an economy.
    • Unemployment: The number of people able and willing to work, but unable to find employment.
    • Fiscal Policy: The use of government spending and taxation to influence the overall level of economic activity.
    • Monetary Policy: The actions of a central bank to control the money supply and interest rates.

    International Trade

    • Absolute Advantage: A country has an absolute advantage in producing a good if it can produce it more efficiently than another country.
    • Comparative Advantage: A country has a comparative advantage in producing a good if it has a lower opportunity cost than another country.
    • Gains from Trade: The benefits of trade, including increased efficiency and variety of goods and services.
    • Tariffs: Taxes imposed on imported goods.
    • Trade Barriers: Restrictions on international trade, including tariffs, quotas, and subsidies.

    Economic Systems

    • Market Economy: An economy in which resources are allocated based on market forces.
    • Command Economy: An economy in which resources are allocated by the government.
    • Mixed Economy: An economy that combines elements of market and command economies.
    • Socialism: An economic system in which the means of production are owned and controlled by the state or by the workers themselves.
    • Capitalism: An economic system in which the means of production are owned and controlled by private individuals and businesses.

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    Description

    Test your knowledge of economics basics, including microeconomics, macroeconomics, international trade, and economic systems. Learn about key concepts like scarcity, opportunity cost, and market equilibrium.

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