2a – Economic Systems and Trade
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2a – Economic Systems and Trade
Economic Systems:
•Market Economies
•Command Economies
•Mixed Economies
The Economic Benefits of Trade
2a – Economic Systems and Trade
Must Know / Outcomes:
Economic Systems
• know the terms and concepts listed at the end of the
chapter
• pure Laissez-faire economic system
• Centrally Planned Economy
• mixed economic systems
• the Bolshevik Revolution
• factors contributing to the collapse of the Soviet
Union
• characteristics of the market system
• the important role of profits and losses
• property rights
• how specialization increases output
• the "invisible hand" of capitalism
• the coordination problem
• the incentive problem
• the circular flow model
Trade:
• absolute advantage
• straight line PPCs
• comparative advantage
– calculate comparative advantage
– specialization and trade
– show the gains from trade
1. Which of the following is a distinguishing
feature of the command system?
1.
2.
3.
4.
Private ownership of capital
Central planning
Heavy reliance on markets
Widespread dispersion of economic
power
1. Which of the following is a distinguishing
feature of the command system?
1.
2.
3.
4.
Private ownership of capital
Central planning
Heavy reliance on markets
Widespread dispersion of economic
power
2. The French term “laissez-faire” means:
1.
2.
3.
4.
“there is no free lunch”
“let it be”
“circular flow”
“public ownership”
2. The French term “laissez-faire” means:
1.
2.
3.
4.
“there is no free lunch”
“let it be”
“circular flow”
“public ownership”
3. Specialization in production is economically
beneficial primarily because it:
1.
2.
3.
4.
Allows everyone to have a job they like
Facilitates trade by bartering
Guarantees full employment
Permits more output from the same resources
3. Specialization in production is economically
beneficial primarily because it:
1.
2.
3.
4.
Allows everyone to have a job they like
Facilitates trade by bartering
Guarantees full employment
Permits more output from the same resources
4. Economic profits in an industry
suggest the industry:
1. Can earn more profits by
increasing the price
2. Should be larger to satisfy
consumers
3. Has excess capacity
4. Is the correct size for consumers
4. Economic profits in an industry
suggest the industry:
1. Can earn more profits by
increasing the price
2. Should be larger to satisfy
consumers
3. Has excess capacity
4. Is the correct size for consumers
5. The “invisible hand” promotes
society’s interest because:
1. Individuals pursuing their self-interest will
produce goods that people want
2. Individuals will produce goods for others out
of concern for their fellow human beings
3. It makes sure that everybody wins from
competition
4. Government regulation pushes businesses
into producing the right mix of goods
5. The “invisible hand” promotes
society’s interest because:
1. Individuals pursuing their self-interest will
produce goods that people want
2. Individuals will produce goods for others out
of concern for their fellow human beings
3. It makes sure that everybody wins from
competition
4. Government regulation pushes businesses
into producing the right mix of goods
6. The coordination problem in centrally
planned economies refers to the idea that:
1. Planners had to direct required inputs to each
enterprise
2. The price level and the level of employment are
inversely related
3. The immediate effect of more investment was
less consumption
4. exports had to equal imports for a central plan to
work
6. The coordination problem in centrally
planned economies refers to the idea that:
1. Planners had to direct required inputs to each
enterprise
2. The price level and the level of employment are
inversely related
3. The immediate effect of more investment was
less consumption
4. exports had to equal imports for a central plan to
work
7. Flow 3
represents:
1.
2.
3.
4.
Wages, rents, interest, profits
Land, labor, capital, entrepreneurs
Goods and services
Consumer expenditures
7. Flow 3
represents:
1.
2.
3.
4.
Wages, rents, interest, profits
Land, labor, capital, entrepreneurs
Goods and services
Consumer expenditures
8. In Pakistan, the
op. cost of 1
Wheat is:
1.
2.
3.
4.
0 Rice
½ rice
2/3 Rice
20 Rice3
8. In Pakistan, the
op. cost of 1
Wheat is:
1.
2.
3.
4.
0 Rice
½ rice
2/3 Rice
20 Rice3
9. Who should
export what?
1. Pakistan both wheat
and rice
2. Pakistan wheat,
Malaysia rice
3. Pakistan rice, Malaysia
wheat
4. Malaysia both wheat
and rice
9. Who should
export what?
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a
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ist
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1. Pakistan both wheat
and rice
2. Pakistan wheat,
Malaysia rice
3. Pakistan rice, Malaysia
wheat
4. Malaysia both wheat
and rice
10. Assume before
specialization, Pakistan is at
“C” and Malaysia at “B”,
If they specialize 100%,
then the gains will be:
1.
2.
3.
4.
45 wheat and 20 rice
20 rice
5 wheat
15 wheat
10. Assume before
specialization, Pakistan is at
“C” and Malaysia at “B”,
If they specialize 100%,
then the gains will be:
1.
2.
3.
4.
45 wheat and 20 rice
20 rice
5 wheat
15 wheat