EC-907 (Economic Systems)
These are the organized ways in which countries handle their economic decisions and solve economic problems.
What are economic systems?
In a private enterprise system, these entities, rather than the government, own the economic resources.
Who are individuals and groups?
This is the rivalry between two or more businesses to attract scarce customer dollars.
What is competition?
This type of risk is "pure," meaning there is only a chance of loss and no chance of gain, and it can usually be covered by insurance.
What is hazard risk (or insurable risk)?
This type of profit is what is left over after all expenses (including cost of goods and operating expenses) have been paid.
What is net profit?
In this specific economic system, the government owns or controls the economic resources.
What is a command economy (or Communism/Socialism)?
This characteristic of private enterprise acts as a "reward" for taking the risk of starting a business.
What is the profit motive?
This market structure is characterized by only one seller that controls the entire market.
What is a monopoly?
When a business chooses not to take an action that involves risk, they are using this handling method.
What is risk avoidance?
This is the mathematical formula used to find a business's profit.
What is Sales Income minus Expenses?
Every economic system must answer these three basic questions.
What are: What will be produced? How will it be produced? How will it be allocated?
These are two common disadvantages or "downsides" of a private enterprise system.
What are unemployment, poverty, or unequal distribution of wealth?
When businesses compete on factors like quality, service, and location rather than price, they are using this strategy.
What is non-price competition?
This classification of risk involves a company’s internal processes, people, or systems failing.
What is operational risk?
These are two internal factors that a business owner can control to influence their profit.
What are expenses and pricing?
This system relies on customs and beliefs to make economic decisions, often passed down through generations.
What is a traditional economy?
While individuals have economic freedom, these two factors act as legal limits to that freedom.
What are laws and taxes?
This market structure features a few large sellers (like the automobile or airline industries) that dominate the market.
What is an oligopoly?
Buying an insurance policy is an example of this method of handling risk.
What is risk transfer?
To increase the chances of receiving increased profit, an owner should focus on these two specific actions.
What is decreasing expenses and increasing sales?
This is the primary reason economic systems are necessary, defined by the fact that no country has enough resources to supply everything its people want.
What is scarcity (or interdependence)?
A private enterprise system is often called this because prices are used to determine what and how much is produced.
What is a price-directed system?
This market structure is the "ideal" version where there are many sellers, identical products, and no one business can control the price.
What is perfect competition?
Unlike pure risk, this type of risk (like investing in the stock market) offers a chance for either gain or loss and is not insurable.
What is speculative risk?
This type of profit is calculated by subtracting the Cost of Goods Sold from the Total Sales Income.
What is gross profit?