Economics Test Review 1.1 2017

Scarcity
Needs
Wants
Economics
Three basic questions
Factors of production
Production possibilities frontier
Opportunity cost
Trade off
Economic Goals of Society
Efficiency
Freedom
Security
Equity
Growth: Innovation, standard of living
Others (environmental protection, full employment, protecting national industries).
Conflicting economic goals
Traditional Economy
Be able to name different features of traditional economies
How is success measured?
Market Economy
Markets
Self-sufficiency
Specialization
Households and Firms
Circular Flow Model
Self interest
Incentive
Competition
Invisible hand
Command Economies
Difference between socialism and communism
Why do command economies oppose the principle of self-interest?
Why was the economic goal of equity most important to Karl Marx?
What ideal is there in socialism/communism that supports this?
Who benefits the most from a centrally planned economy in theory and who benefits the most from a centrally planned economy in practice?

Short Answer: PICK ONLY ONE

What is the difference between self-interest and greed? Does it matter in a market economy? Be sure to use specific examples and economic terminology to explain your reasoning.
What does the following quote demonstrate regarding human nature? How does it relate to the invisible hand?

“Give me that which I want, and you shall have this which you want… and it is in this manner that we obtain from one another the far greater part of those good [services] which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

“The inherent drawback of capitalism is the unequal distribution of wealth; the inherent dignity of socialism is the equal distribution of poverty.” –Winston Churchill

Does capitalism lead to an unequal distribution of wealth? Does socialism lead to an equal distribution of poverty? Give an analysisand explain your answer in economic terms.

“The socialism I believe in is everybody working for the same goal and everybody having a share in the rewards. That’s how I see football, that’s how I see life.” –Bill Shankly

Is this quote an accurate characterization of socialism? How is it true? How is it false? Give an analysis and explain your answer in economic terms.