Fundamentals of Economics
What are the three basic economic questions every society must answer?
What to produce, how to produce, and for whom to produce?
Who is considered the father of capitalism?
Adam Smith
In a command economy, who makes all economic decisions?
The government
What is a stock?
A share of ownership in a company.
What is the simplest form of business ownership?
Sole proprietorship
What is opportunity cost?
The value of the next best alternative that is given up.
What is the “invisible hand”?
The self-regulating nature of the market.
Name one country that has a command economy.
North Korea
What does IPO stand for?
Initial Public Offering
What is a disadvantage of a sole proprietorship?
Unlimited personal liability
Define scarcity.
Limited resources for unlimited wants.
In a free market, who answers the basic economic questions?
Individuals and businesses (consumers and producers).
What is one advantage of a command economy?
Can quickly mobilize resources and reduce inequality.
What is the name of the market where stocks are bought and sold?
Stock exchange
What is a corporation?
A legal entity owned by shareholders.
What is the difference between needs and wants?
Needs are essential for survival, wants are things desired but not necessary.
What motivates producers in a free market economy?
Profit
What is one major disadvantage of command economies?
Lack of efficiency and innovation.
What is the difference between a bull market and a bear market?
Bull market = rising prices; bear market = falling prices.
What is the difference between a bull market and a bear market?
Bull market = rising prices; bear market = falling prices.
What are the four factors of production?
Land, labor, capital, and entrepreneurship
What is consumer sovereignty?
The idea that consumers control what is produced by choosing what to buy.
What is the term for a government setting prices and wages?
Price controls
What is diversification in investing?
Spreading investments to reduce risk.
What is diversification in investing?
Spreading investments to reduce risk.