FHS Unit 2 Make up Exam

Front

Difference between market and command systems

Back

Market: individuals decide production; Command: government decides production

Answer explanation

The main difference is that in a market system, individuals make production decisions based on supply and demand, while in a command system, the government centrally plans and makes those decisions.

Front

Determines prices in a market economy

Back

Laws of supply and demand

Answer explanation

In a market economy, prices are primarily determined by the laws of supply and demand. When demand for a product increases or supply decreases, prices tend to rise, and vice versa, making this the fundamental mechanism for price determination.

Front

Role of entrepreneurs in command economies

Back

Limited economic opportunities

Answer explanation

In command economies, entrepreneurs face limited economic opportunities due to government control over production and resource allocation, restricting their ability to innovate and set market prices.

Front

Production decisions in a command economy

Back

The government.

Answer explanation

In a command economy, the government makes production decisions to control resources and production levels, unlike in market economies where individual consumers and private firms have that power.

Front

Primary characteristic of a market economy

Back

Competition among businesses

Answer explanation

A primary characteristic of a market economy is competition among businesses, which drives innovation and efficiency. In contrast, government ownership, centralized planning, and fixed pricing are features of command economies.

Front

Goods and services distribution in a market economy

Back

By firms based on consumer demand

Answer explanation

In a market economy, goods and services are distributed by firms responding to consumer demand. This means that production and distribution are driven by what consumers want, rather than by government or random selection.

Front

Who decides production in a market economy?

Back

Consumers and businesses.

Answer explanation

In a market economy, consumers and businesses drive production decisions based on demand and supply. Consumers express their preferences through purchases, while businesses respond by producing goods and services that meet those needs.

Front

Benefit of market economies

Back

Efficient resource allocation

Answer explanation

A benefit of market economies is efficient resource allocation, as they allow supply and demand to dictate prices and production, leading to optimal use of resources. This contrasts with government control, limited options, and fixed pricing.

Front

Benefits of full employment vs. below full employment

Back

Improved wages due to employer competition

Answer explanation

A country at full employment benefits from improved wages as employers compete for a limited pool of workers, driving up salaries. In contrast, a country below full employment faces less competition for jobs, leading to stagnant wages.

Front

Consequence of inflation

Back

Increase in prices or smaller sizes of items like food

Answer explanation

If inflation grows, it typically leads to higher prices for goods, including food, or smaller sizes for the same price. This reflects the decrease in purchasing power, making the correct choice about price increases.