ECA115D/ECN105D/EA105D TEST 1 28. In economics, the "HOW" in the production question refers to a) The ways in which factors of production may be combined to produce output b) The way in which firms uses principle of profit maximization c) The way in which the state sets output targets in a command economy d) The problem of scarcity in the economy 29. Adam Smith's concept of the invisible hand suggests that the selfish actions of rational individuals will generate an efficient allocation of scarce resources a) False b) True 30. In the South African economy, the problem of "WHAT TO PRODUCE" is solved primarily by: a) The national Planning Commission b) The South African Reserve Bank c) The South African Revenue Services d) The patterns of consumers spending and direction of government 31. Problems relating to the allocation of the factors of production and the distribution of income exist: a) In socialist economies only b) In capitalist economies only c) In market economies only d) In all economies 32. Which statement best describes the economic system? a) A network of parts interlocked to form a pattern that aims at solving the What, How and For Whom questions in the society. b) Aims at studying the choices economic agents make under conditions of scarcity. c) It explains how the different types of systems are interdependent. d) Coordinating mechanism 33. Which of the following is not a common feature in classifying economic systems? a) Property rights b) Market capitalism c) Planned socialism. d) Traditional system 8
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Ever heard of the term "creative destruction"? This concept, introduced by Joseph Schumpeter, describes how in a market economy, innovation leads to the decline and obsolescence of old industries and ways of doing things, ultimately fostering economic growth. It’s like nature’s way of clearing out the old to make room for the new—think of it as economic spring cleaning! Understanding the allocation of resources doesn't just rely on theory; it has real-world implications! For instance, when consumers decide where to spend their money, it can dramatically shape industries—supporting some businesses to thrive while others fade. If everyone suddenly craved electric cars over gasoline, manufacturers and entire economies would pivot towards sustainable energy, showcasing just how powerful our choices can be!
