In which type of economy does the government control the factors of production and make all decisions about their use?

Under a command economy, governments own the factors of production such as land, capital, and resources, and government officials determine when, where, and how much is produced. This is also sometimes referred to as a planned economy.

Which factor is the basis for the theory of comparative advantage?

Differing factor endowments form the basis of the theory of comparative advantage. (Also known as ‘resource endowments’.) Refers to foreign national currencies, i.e. for any country, it refers to currencies other than its own.

What does the US have a comparative advantage in?

The United States’ comparative advantage is in specialized, capital-intensive labor. American workers produce sophisticated goods or investment opportunities at lower opportunity costs.

How did mercantilism affect the American colonies?

How did mercantilism affect the Colonies? Americans provided raw goods to Britain, and Britain used the raw goods that were sold in European markets and back to the colonies. The colonies could not compete with Britain in manufacturing. The more the colonies export, the more wealth and power Britain has.

What type of economy controls some aspects of the economy?

Government Controls Production in Command Economy In a command economy, the government (or some other central authority) controls and steers major aspects of economic production. The government decides the means of production and owns the industries that produce goods and services for the public.

Which factor plays the biggest role in motivating economic decisions in a command economy?

Ownership: In a free market economy, people and companies can own businesses and make investments. In a command economy, the government owns almost everything, so you cannot invest in anything. Incentive: Profit is the main motivating factor in a free market economy as opposed to society’s welfare in a command economy.

What are the four factor endowments?

Factor endowments are the land, labor, capital, and resources that a country has access to, which will give it an economic comparative advantage over other countries.

What is theory of comparative advantage?

comparative advantage, economic theory, first developed by 19th-century British economist David Ricardo, that attributed the cause and benefits of international trade to the differences in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities among countries.

What is the US absolute advantage?

Production Possibilities and Comparative Advantage The United States has an absolute advantage in productivity with regard to both shoes and refrigerators; that is, it takes fewer workers in the United States than in Mexico to produce both a given number of shoes and a given number of refrigerators.

What does Mexico have a comparative advantage in?

Mexico’s major comparative advantage remains climate, the ability to produce fresh fruits and vegetables when US farmers except in Florida are not producing. Commodities such as avocados are produced year round, and protective culture is allowing Mexican farmers to extend their production and export seasons.

Was mercantilism good or bad for the colonies?

Mercantilism brought about many acts against humanity, including slavery and an imbalanced system of trade. During Great Britain’s mercantilist period, colonies faced periods of inflation and excessive taxation, which caused great distress.

How did mercantilism led to the American Revolution?

Smith attacked mercantilism and promoted free trade in markets, guided not by government regulation and policy, but by what he called an invisible hand of supply and demand. The imperial taxes on commerce and trade had led the American colonies to fight the American Revolution and declare their independence.