Download Economics 11 Chapters 1 – 7

Economics 11 Review Chapters 1 – 7
ANSWERS
NAME: _______________
1. Explain the difference between physical and psychological wants and provide a good example that
illustrates your understanding of this concept.
Physical Wants are those wants or needs that are necessary to sustain human life.
Includes the need for air, water, food, clothing and shelter
Psychological Wants are wants for those things that are not essential to sustain life.
This includes wants for exotic food, fashionable clothes, an air conditioned home.
2. What are the three types of productive resources? Explain each type and provide and example for
each.
Human resources are the skills and efforts people use in production. Ex. Hair stylist
Capital resources are factories and machinery. Ex. Nike factory
Natural resources are land and forests. Ex. Fish, trees, and coal.
3. What are the six characteristics of successful entrepreneurs?
1. a “go-getter” attitude 2. risk taking 3. Hard worker 4. motivation 5. self-confidence 6. Objectively
4. Draw the market spectrum (include perfect competition, perfect monopoly, monopolistic
competition, differentiated oligopoly and homogeneous oligopoly).
1. perfect competition 2. monopolistic competition 3. homogeneous oligopoly 4. differentiated oligopoly
5. perfect monopoly
5. Define downward sloping demand and provide an example using oranges.
the law of downward sloping demand – this law states that when the price of a good is raised (and there are
no other changes), less of it will be demanded. If the price of a good is lowered (and there are no other
changes) then the quantity demanded will increase.
Ex. Prices or oranges are raised, less of oranges are in demand now.
6. Define elasticity of demand and provide an example using Caribbean vacations.
elasticity of demand – the responsiveness of the quantity demanded to a change in price. Ex. If vacations
prices drop more people welling to go on vacation.
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7. Businesses are established and financed in five ways, what are they?
-sole proprietorship (aka single proprietorship)
-partnership
-corporation
-public (government) enterprise
-cooperative
8. The quality of human resources depends on four major characteristics, what are they?
1. health 2. education 3. work attitudes
4. population size
9. What are capital resources?
capital resources are goods that are used in production of other goods and services
10. Provide three examples of capital resources in CHDHS.
Answer will vary. Ex. machines in the building.
11. The collapse of the command economy of the Soviet Union is blamed on four major causes, explain
each.
1. Failure of Coordination 2. Inadequate Quality Control 3. Lack of Incentives 4. Pollution
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12. What is scarcity?
Scarcity is the term for the fact that there is a limited amount of resources that can be used to produce a
limited amount of goods and services to meet unlimited human wants.
13. What are the three major questions that every society must answer?
1. what are we going to produce?
2. how is it to be produced?
3. who receives how much?
14. What are the three model economies?
1. pure traditional economy
2. pure command economy
3. pure market economy
15. Generally, all productive activity can be divided into three categories: primary, secondary and
tertiary. Define each of three categories and provide and example of a job in each.
- people who work in primary industries work close to the land
Ex. farmers, miners, lumberjacks, oil riggers and fishers (all contribute staple products)
- secondary industries are involved in manufacturing the staple products into finished goods
Ex. a finished good can be a capital good or a consumer good
- tertiary industries are responsible for everything that goes on with the finished good (from transporting to
selling)
tertiary industries are the vital link between the producer and the consumer
Ex. service workers comprise about 75% of Canadian workforce
16. There are five basic characteristics of the pure market economy, what are they?
1- private property rights
2- profit
3- consumer sovereignty
4- self- interest
5- competition
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17. What is opportunity cost? Explain and provide an example.
Opportunity cost is the benefit lost of doing one thing rather than another.
For example:
If you decide to do homework rather than watch TV, than the opportunity cost of homework is the
opportunity lost of enjoying TV.
18. What are the eight objectives of the economy of Canada?
1. Full employment
2. Stable prices
3. Balanced trade
4. Economic growth
5. Economic justice
6. Economic freedom
7. Economic efficiency
8. Reasonable amount of debt
19. What is a franchise?
A franchise is a license or privilege granted by a corporation (the franchiser) to another corporation or
individual (the franchisee) to sell a particular product or service with an advertised trade name.
20. Identify two pros and two cons of owning a franchise?
Pros:
• By having others finance the establishment of the stores or outlets, the franchiser’s total sales can
grow quickly
• And because their money is tied up in the franchise, franchisees are highly motivated to run their
businesses efficiently
Cons:
• The franchisee must follow the operating procedures of the parent firm
• They must pay a fee for the franchise
• And usually they pay the franchiser a percentage of sales
21. What is a market?
A market is any network that brings buyers and sellers into contact with one another so they can exchange
goods and services
22. What are the five ways companies can restrict competition?
1. Unfair prices
2. Establishing a cartel
3. through interlocking directors
4. through mergers
5. By establishing a holding company
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23. What are two advantages of a company having large-scale operations?
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ability to engage in research
large scale production
24. What is vertical integration?
vertical combination (integration) - is the control by a company of the various stages of production
25. What is horizontal integration?
horizontal combinations – when companies of the same type combine by merging or by setting up a
holding company
26. Explain what is meant by the term ceiling prices? Provide an example.
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A government may feel that the price for a good or service is too high, and therefore it fixes a
maximum or ceiling price for it.
The maximum or ceiling price is the highest price that may be charged legally for a good or
service.
For example: rent controls
27. How are the three major questions answered in a pure command economy?
WHAT are we going to produce?
- government decides what goods and services to produce
HOW will we produce it?
- government owns the land, factories, and machines, and they decide how goods and services will be
produced
- government determines who will work where, and what machines and raw materials will be
available to them
WHO receives how much?
- government decides for whom the goods and services will be produced, and they establish the pay and
benefits
28. How are the three major questions answered in a pure traditional economy economy?
WHAT are we going to produce?
- we will produce what we have always produced
HOW is it to be produced?
- the same way we always have
WHO receives how much?
- people receive the same amount they have always received
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29. How are the three major questions answered in a pure market economy?
WHAT are we going to produce?
- this is determined by the dollar votes of consumers
- consumers directly inform and reward those who have correctly anticipated consumer wants
HOW will we produce it?
- the how is answered by the competition among producers
- the market forces producers to use cheaper methods of production
- again, consumers are the driving force as they seek competitive prices
WHO receives how much?
- consumers reward the producers who provide the goods and services they want at competitive prices
 consumers reward these producers by buying goods and services from them
- in other words, who receives how much is determined by the market
30. Explain how an industrial incubator can help new businesses in their first few years?
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it provides a favourable environment in which new businesses can take root and grow
helps to increase public awareness about small business opportunities, as well as exposing potential
entrepreneurs to prospects in worthwhile industries
Offers business counselling
31. What is limited liability? How does it related to sole proprietorships, partnerships and corporations?
Explain fully.
Limited is the legal right to limited liability. People who have invested in a corporation are not
personally liable for all its debts.
 the investment is all they lose
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