Question

Descriptions of Economic Systems1. State planners in Asgard met to decide what the country should focus on producing. After muchdeliberation, they decided it would be in the country’s best interest to use their limited resourcesto produce automobiles instead of other consumer goods, such as electronics or textiles. The stateplanners passed their decision down to factories, and allocated to them raw materials, workers,and other resources needed to produce automobiles. Factories were then told how much theyshould produce with these resources and who the final products should be shipped to.Answer: __________________________________How do you know?2. In Summerland, business owners decide what to produce, how much to produce, and who toproduce for. The CEO of Guardian Audio, one of the leading audio equipment producers in thecountry, recently decided to increase production levels of the company’s newest MP3 playermodel, and at the same time decrease production levels of their most popular CD player. Thereason for the emphasis on MP3 players is that demand for CD players has decreaseddramatically as MP3 technology has taken over the market. Simply put, there is more profit to bemade in the MP3 market.Answer: ___________________________________How do you know?3. In Wonderland, people rarely engage in market transactions. For the most part, they do notneed to. Families grow their own vegetables and raise their own animals or hunt to get meat.Certain times get tough for people in Zenn-La, like when the winters are particularly cold or animalschange their migration patterns. For this reason, it is important that families stock up in "goodtimes" and develop relationships with neighbors with whom they can share or trade.Answer: __________________________________How do you know?4. In The Merry Olde Land of Oz, business owners make most economic decisions. As long asthey abide by fair trade policies, they can decide what to produce, how to produce, and for whomto produce without government intervention. These decisions are made by business owners basedon what happens in the market. For example, a computer manufacturer recently developed a newvideo gaming system, but decided to wait until closer to the holidays to release the system to thepublic because it believed anticipation among consumers would allow the company to charge ahigher price for the system.Answer: __________________________________How do you know?

Answer 1

1. The description suggests that the economic system in Asgard is a planned economy or a command economy. The state planners, who represent the government, make decisions on what to produce, allocate resources to factories, and determine production levels. This central planning and control indicate a lack of market forces and individual decision-making in the allocation of resources.

2. The description indicates that the economic system in Summerland is a market economy or a capitalist economy. Business owners, represented by the CEO of Guardian Audio, have the authority to decide what to produce, how much to produce, and for whom to produce. The emphasis on profit maximization and the ability of individual businesses to respond to market demand reflect a decentralized decision-making process characteristic of market economies.

3. The description implies that the economic system in Wonderland is a traditional economy. People primarily rely on subsistence agriculture, hunting, and gathering for their sustenance. The emphasis on self-sufficiency and the need to stock up resources for challenging times suggests a lack of market transactions and a reliance on traditional methods of production and distribution.

4. The description suggests that the economic system in The Merry Olde Land of Oz is a market economy or a mixed economy with a market-oriented approach. Business owners have the freedom to make economic decisions based on market conditions and consumer demand. The decision to time the release of a product based on consumer anticipation and the ability to charge a higher price demonstrate the influence of market forces on business decisions. The mention of fair trade policies implies a certain level of government regulation within the market economy framework.