Study the 5 fundamental questions of economics for your Economics exam. This guide covers what to produce, how to produce, for whom to produce, scarcity, and opportunity cost.
Q: 1. What is to be Produced?
Answer: Goods and services that can be sold at a profit
Q: -Normal Profit
Answer: The cost payment for the contributions by the entrepenuer
Q: -If a company is making a profit (economics) what will happen to that industry?
Answer: Economic loss
Q: -Businesses have freedom-Consumer Sovereignty –
Answer: -Freedom to please consumers-consumers vote with their dollars in the marketplace
Q: 2. How should production be organized?
Answer: Resources will be steered to industries that make the products consumers want.
Q: -Companies that are the most efficient
Answer: Least-cost production
Q: 3.How do we distribute the output, or for whom will we produce goods and services for?
Answer: Whoever has the ability and willingness to pay the price. Rich vs. Poor (ethical)
Q: -What determines the size of one’s income?
Answer: Quantity and quality of human and nonhuman resources