Economics Final Exam Chapter 2

Front 1

Three economic questions

Back 1

-What to produce
-How to produce it
-For whom to produce it

Front 2

Pure Market Economy

Back 2

an economic system with no government involvement so that private firms account for all production

Front 3

Pure Centrally Planned Economy

Back 3

an economic system in which all resources are government owned and production is coordinated by the central plans of government

Front 4

Mixed Economy

Back 4

an economic system that mixes central planning with competitive markets

Front 5

Traditional Economy

Back 5

an economic system shaped largely by custom or religion

Front 6

5 problems with both pure market and pure centrally planned economies

Back 6

Pure Market: difficulty enforcing property rights, some people have few resources to sell, some firms try to monopolozie markets, no public goods, externalities

Pure Centrally Planned: consumers get low priority, little freedom of choice, inefficient, wasted resources, environmental damage

all economies in the world are at least somewhat mixed

Front 7

absolute vs. comparative advantage

Back 7

to be able to make something using fewer resources than other producers require

the worker with the lower opportunity cost of producing a particular output should specialize in that output-> leads to specialization and the division of labor