Government Allocation and Income Distribution Quiz

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Explain how the government's allocation of resources may not always reflect the wishes of the consumer.

The government's allocation of resources may focus on expanding certain areas of the economy, such as weapon building, which may not necessarily reflect the wishes of the consumer. The government's decisions are often complex and not all decisions are left up to the consumer.

Describe how income distribution is determined in a command economy, according to the text.

In a command economy, income distribution is determined by the government, and all workers tend to receive the same wage, regardless of their job. This leads to standardized products and limited prices, causing excess demand and queueing.

Explain Karl Marx's criticism of capitalism, as presented in the text.

According to the text, Karl Marx believed that capitalists' profit came from exploiting labor, as they underpaid workers for the value they created. He wanted to remove the difference between the incomes of owners and workers, and believed that capitalism would collapse, leading to communism.

Discuss how the concept of limited resources is reflected in the command economy described in the text.

The text mentions that in a command economy, some goods can be purchased while others, such as houses, are allocated by the government. This suggests that resources are limited, and the government must make decisions about how to distribute them. Signup and view all the answers

Analyze how consumer choices are impacted in the command economy described in the text.

In the command economy described, consumer choices are limited, as the government determines income distribution and standardizes products, leading to excess demand and queueing. Workers can only spend their wages on what the government allows them to purchase. Signup and view all the answers

Explain the concept of opportunity cost in the context of government spending decisions, as discussed in the text.

The text suggests that the government's allocation of resources may focus on expanding certain areas, such as weapon building, rather than reflecting the wishes of the consumer. This implies that the government's spending decisions involve opportunity costs, as resources allocated to one area cannot be used for other purposes. Signup and view all the answers

According to the diagram, what is the opportunity cost of producing 60 capital goods?

The opportunity cost of producing 60 capital goods is 20 consumer goods. Signup and view all the answers

If the economy decides to produce no capital goods, how many consumer goods can it produce?

If the economy produces 0 capital goods, it can produce 80 consumer goods. Signup and view all the answers

What is the opportunity cost of producing one additional consumer good?

The opportunity cost of producing one additional consumer good is 3 capital goods. Signup and view all the answers

If the economy is operating at point B, what happens to its production possibilities if it experiences economic growth?

If the economy experiences economic growth while operating at point B, its production possibility curve will shift outwards, as represented by the purple arrows. Signup and view all the answers

What could cause a decline in an economy's production possibilities, as represented by the orange arrows?

A decline in an economy's production possibilities, as represented by the orange arrows, could be caused by factors such as natural disasters, depletion of natural resources, or a decrease in the quantity or quality of labor. Signup and view all the answers

How does the concept of opportunity cost relate to the idea of limited resources in an economy?

The concept of opportunity cost arises from the fact that resources are limited in an economy. Because resources are scarce, using them to produce one good means sacrificing the opportunity to use them to produce another good. Signup and view all the answers

What is the main purpose of a mixed economy?

The main purpose of a mixed economy is to strike a balance between the free market mechanism and government planning in allocating resources in a country. Signup and view all the answers

What is one role of the government in a mixed economy regarding monopolies?

One role of the government in a mixed economy is to prevent the abuse of monopolies by companies with significant market share. Signup and view all the answers

How does the government in a mixed economy protect consumers?

The government in a mixed economy protects consumers by passing consumer protection laws to ensure the quality of products and services. Signup and view all the answers

What is an example of a public good provided by the government in a mixed economy?

An example of a public good provided by the government in a mixed economy is emergency services. Signup and view all the answers

How does the government in a mixed economy address externalities?

The government in a mixed economy addresses externalities by ensuring their consideration through government action. Signup and view all the answers

What is one way the government in a mixed economy modifies the price system?

One way the government in a mixed economy modifies the price system is by limiting the production of demerit goods like child pornography. Signup and view all the answers