question

The importance of the production possibilities model is that it shows the different combinations of goods and services that society can produce:

answer

Given a fixed amount of resources, In a fully employed economy, Efficiently, Inefficiently

question

What best describes the relationship between trade-offs and opportunity cost?

answer

As you give up consumption or production of one good over another (the trade-off), an opportunity cost is incurred.

question

An economy can produce either guns or butter with all available resources. Suppose it currently produces all butter and it chooses to produce some guns, thereby giving up some production of butter. As a result, the first 200 units of guns are produced at the cost of only 50 units of butter. Not surprisingly, the next 200 units of guns are produced at the cost of 100 units of butter and the last 200 units of guns at the cost of 300 units of butter. What does this describe?

answer

The law of increasing opportunity costs

question

The law of increasing opportunity costs states that as production of a particular good ____ the opportunity cost of producing an additional unit _____.

answer

Rises; rises

question

Combinations of goods that fall outside the production possibilities curve:

answer

Currently are unattainable, Require economic growth, Would require resources that are not currently available.

question

The economic question of '____ to produce' is about decisions related to the mix of factor inputs (land, labor, capital...) used to produce goods and services

answer

How

question

In the type of economy existing in the United States and most other countries, the government plays ____ role.

answer

A substantial

question

How would one define ceteris paribus?

answer

The idea that factors other than those being considered in a particular analysis do not change, Other-things-equal

question

How would one best clarify the "other-things-equal" assumption?

answer

All variables except those under immediate consideration are held constant for particular analysis.

question

The law of increasing marginal opportunity costs is driven by:

answer

The fact that as a firm increases output, costs rise, Resources that are not equally productive nor interchangeable in the production of different goods and services

question

To produce at a point lying ______ the production possibilities curve would require economic growth.

answer

Outside

question

Consider the relationship between the price of gas and the quantity of gas consumed by drivers. If we are to consider the price of gas as the only factor affecting the quantity of gas consumed, while holding other factors such as drivers' incomes and tastes and preferences irrelevant, then we are invoking

answer

Ceteris paribus, The other-things-equal assumption

question

A ______ economic analysis concerns what is, whereas a ______ economic analysis represent subjective statements of what ought to be.

answer

Positive; normative

question

A production possibilities curve shows the attainable combination

answer

Of two goods that can be produced given a specific set of resources

question

In a graph, if the line slopes downward from the left to the right, it has a _____ slope.

answer

Negative

question

Combinations of goods that fall inside the production possibilities curve

answer

Are inefficiently produced, Are not utilizing all of an economy's resources, Are attainable

question

What consists of the physical and mental activities that people contribute to the production of goods and services?

answer

Labor

question

Entrepreneurial ability is an economic

answer

Resource

question

Economics is a science concerned with the allocation of _____ resources among competing uses.

answer

Scarce

question

A _____ failure is an imperfection in the market mechanism that prevents optimal outcomes.

answer

Market

question

What would be synonymous with land to an economist

answer

Water, Oil and mineral deposits, Sunlight, Arable land, Forests

question

The "economy is us" means that it represents our collective _______ activities.

answer

Production and Consumption

question

The three main decisions that must be addressed by an economic system does NOT include:

answer

WHY output is produced

question

Points lying _____ the production possibility curve are unattainable with the current availably of resources and technology

answer

Outside

question

Combinations of output that fall inside the production possibilities curve represent:

answer

Inefficient use of resources, Goods that are attainable, Less total output in an economy

question

The economic question of '_______ to produce' is about decisions related to the mix (quantity and type) of goods and services to make available in a given economy.

answer

What

question

A _______ failure is government intervention that fails to improve economic outcomes.

answer

Government

question

Due to scarce resources, every individual, whether rich or poor, is faced with an ____ cost when choosing to produce or consume more of one good over another.

answer

Opportunity

question

The branch of economics that studies the decision-making process of individual workers, households, and firms (i.e. individual components of the larger economy) is known as:

answer

Microeconomics

question

An entrepreneur:

answer

Makes strategic business decisions that set the course of an enterprise, Takes the risk of earning profits or suffering losses from owning an enterprise, Innovates

question

The situation where one thing has to be given up in order to have some other item is called a

answer

Trade-off

question

_____ is the notion that, in general, the quantity desired of resources exceeds the quantity available.

answer

Scarcity

question

The three main decisions that must be addressed by an economic system include:

answer

For whom output is produced, How output is produced, What goods and services to produce

question

The vertical axis on a graph is often called the

answer

Y axis

question

The factors of production include

answer

Labor, Entrepreneurship, Capital, land

question

As such, the production possibilities curve illustrates two essential principles: _____ and _____

answer

Scarce resources; opportunity costs

question

For economists, ____ goods are those goods used to produce the final consumer goods and services.

answer

Capital

question

The essential feature of the market mechanism is the ____ signal.

answer

Price

question

What does each point on a production possibilities curve represent?

answer

The maximum potential output for a combination of two or more final goods and services, Efficiency in production

question

The economic question of '_____ to produce' is about decisions related to who is going to consume the goods and services produced.

answer

For Whom

question

_____ recognized the need for government intervention.

answer

Karl Marx and John Maynard Keynes

question

Natural resources, labor, capital and entrepreneurship are all scarce economic resources privately or collectively owned by members of society. Where these scarce resources are used to produce goods or services there is:

answer

A cost borne by society in utilizing these resources to produce any good or services, No "free lunch"

question

Capital goods differ from final goods in that:

answer

Capital goods satisfy consumer wants indirectly through the production of final goods, Final goods satisfy wants directly

question

The term "laissez-faire" refers to:

answer

Keeping government from interfering in the economy

question

The figure shows a _____ curve which means the slope changes as you move along the curve.

answer

Nonlinear

question

What best represents the relationship between capital good and a consumer good or service?

answer

A commercial baking oven and loaves of bread for sale at a bakery

question

A consequence of the economic problem of scarcity is that

answer

Choices have to be made about how resources are used.

question

A production possibilities curve indicates the

answer

Maximum combinations of goods and services an economy can produce given its available resources and technology

question

According to the text, there is no such thing as a free lunch because

answer

Resources used to produce the lunch could be used to produce other goods and services

question

Adam Smith's invisible hand is now called

answer

The market mechanism

question

Capital, as economists use the term, refers to

answer

inal goods that are used to produce other goods and services.

question

Economics can be defined as the study of

answer

How scarce resources are allocated.

question

Factors of production are

answer

Scarce in every society

question

Government intervention may achieve a more optimal outcome than the market mechanism when addressing

answer

Consumption of cigarettes.

question

In economics, scarcity means that

answer

Society's desires exceed resources available

question

In a market economy, the people who receive the goods and services that are produced are those who

answer

Are willing to pay the highest price.

question

Macroeconomics focuses on the performance of

answer

The overall economy.

question

Opportunity cost is

answer

What is given up in order to get something else.

question

The "guns versus butter" dilemma that all nations confront is that

answer

An increase in national defense implies more sacrifices of civilian goods and services.

question

The book Wealth of Nations was written by

answer

Adam Smith in 1776.

question

The basic factors of production include

answer

Land, labor, capital, and entrepreneurship.

question

The Latin phrase ceteris paribus means

answer

Other things remain equal.

question

The doctrine of laissez faire is based on the belief that

answer

Markets are likely to do a better job of allocating resources than government directives.

question

The invisible hand refers to

answer

The allocation of resources by market forces.

question

The market mechanism may best be defined as

answer

The use of market prices and sales to signal desired output.

question

Which of the following is the best example of land?

answer

The water used to make a soft drink.

question

Which of the following is true when an economy is producing efficiently?

answer

The economy is producing on the production possibilities curve.

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