Question

managerial economics 1st quiz questions 1) why do we all face choices in life? 2) wouldn't it make more sense to make our own clothes and grow our own food? explain 3) what is meant by thinking at the margins? 4) is communism the same as socialism? 5) does the us have pure capitalism? explain 6) what is meant by fiat money?

Answer 1

Answer 1 : We always face choices in life because of three below reasons.

a) Ends (demands) are unlimited

b) Means to fulfill those demands are limited

c) Limited means has diverse uses

Answer 2 : Certainly it would not make any sense at all for an economy if people make their own clothes and grow their own food. This is because of multiple logical reasons as follows :

a) we may not get economies of scale because of higher cost of several internal and external factors of production.

b) Such an economy would always remain as a " Closed economy" with no scope of globalization.

c) Technical backwardness would exists due to lack of upcoming techniques & methods

d) There can be chances of shortage/excess of production than consumption that will turn up into waste of time/efforts/money and factors of production

Answer 3 : Thinking at margins mean thinking, calculating, analyzing and deciding the cost of an additional/extra unit. For instance, suppose we go to Pizza Hut and see several combo options available. Let's say, combos are as follows :

Combo 1 : Pan Pizza with coke for $ 20

Combo 2 : Pan Pizza with coke and ice cream for $ 22

While looking at these combos we instantly start thinking that for an additional unit/item that is ice cream the additional cost that will occur is $ 2 and than compare it with the utility that we would drive from consumption of this additional unit ( ice cream). This is called thinking at margins.

Answer 4 : Communism and Socialism are not the same. Below are point of differences between these two :

a) Meaning : Communism is Social organization system, that focuses on communal ownership and eliminating class distinction whereas Socialism is theory of social organization where there is public or cooperative ownership of the means of production.

b) Management of resources : In communism management of resources lies on few people belonging to a particular authoritarian party and in Socialism it's with people at large.

c) Means of production : Equally owned by the members of the state in Communism and the same is owned by the citizens in Socialism.

d) Purpose : I Communism the purpose is achieve equality among members of society and promoting classless society and in Socialism it's purpose is to achieve equality and fairness among the society members.

Answer 5 : The United States is often described as a "capitalist" economy, a term coined by 19th-century German economist and social theorist Karl Marx to describe a system in which a small group of people who control large amounts of money, or capital, make the most important economic decisions. Marx contrasted capitalist economies to "socialist" ones, which vest more power in the political system.

Further, if the pure capitalism described by Marx ever existed, it has long since disappeared, as governments in the United States and many other countries have intervened in their economies to limit concentrations of power and address many of the social problems associated with unchecked private commercial interests. As a result, the American economy is perhaps better described as a "mixed" economy, with government playing an important role along with private enterprise.

Answer 6 : Fiat money is currency that a government has declared to be legal tender, but it is not backed by a physical commodity. The value of fiat money is derived from the relationship between supply and demand rather than the value of the material from which the money is made. Fiat money only has value because the government maintains that value, or because two parties agree on said value. Fiat money was first introduced as an alternative to commodity-backed money.