ECO2013 – Homework Chapters 1 & 2 – Flashcards
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The economizing problem is essentially one of deciding how to make the best use of:
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Limited resources to satisfy unlimited economic wants
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The basic truth that underlies the study of economics is the fact that we all face:
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Scarcity
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Economics may best be defined as the:
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social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.
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The concept of opportunity cost:
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suggests that the use of resources in any particular line of production means that alternative outputs must be forgone.
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The Latin term "ceteris paribus" means:
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other things equal.
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The production possibilities curve illustrates the basic principle that:
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if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
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A production possibilities curve shows:
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the maximum amounts of two goods that can be produced, assuming the full use of available resources.
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Refer to the diagram. This economy will experience unemployment if it produces at point:
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D.
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The production possibilities curve:
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is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.
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If an economy is operating inside its production possibilities curve for consumer goods and capital goods, it:
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can produce more of both consumer goods and capital goods by using resources that are currently idle.
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Refer to the above diagram. Points A, B, C, D, and E show:
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combinations of bicycles and computers that society can produce by using its resources efficiently.
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Refer to the diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:
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will be 4 units of bicycles.
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Refer to the diagram. The combination of computers and bicycles shown by point G is:
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unattainable given currently available resources and technology.
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Refer to the diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:
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will cost 1 unit of computers.
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Refer to the diagram. The combination of computers and bicycles shown by point F:
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is attainable but implies that the economy is not using all its resources.
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The law of increasing opportunity costs states that:
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if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.
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The law of increasing opportunity costs is reflected in a production possibilities curve that is:
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bowed in toward the origin.
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Which of the following will shift the production possibilities curve to the right?
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A technological advance that allows farmers to produce more output from given inputs.
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Which of the following will not produce an outward shift of the production possibilities curve?
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The reduction of unemployment.
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Which of the following is one of the Five Fundamental Questions?
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What goods and services will be produced?
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The market system's answer to the fundamental question "What will be produced?" is essentially:
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"Goods and services that are profitable."
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The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially:
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"In ways that minimize the cost per unit of output."
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The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:
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"Those willing and able to pay for them."
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The idea that the desires of resource suppliers and firms to further their own self-interest will automatically further the public interest is known as:
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The invisible hand
