Econ 101 Chapter 1 – Flashcards
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the study of how best to use society's scarce resources and how scarce resources are allocated to fulfill soceity's goals
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Economics
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the fundamental problem of economics; society's desires exceed the want-satisfying capability of the resources available to satisfy those desires
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scarcity
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_______________ costs are experienced whenever choices are made
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opportunity
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land, labor, capital, and entrepreneurship
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factors of production
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final goods that are used to produce other goods and services
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capital
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an innovator, someone who brings resources together and produces a product, a risk taker
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entrepreneuer
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The role of the entrepreneur in an economy is to: A) Bring the factors of production together and assume the risk of production. B) Work with government planners to determine what goods are produced. C) Arrange bank financing for the owners of new businesses. D) Ensure full employment of labor.
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A
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the alternative that must be given up in order to get something else; goods or services that are forgone in order to obtain something else
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opportunity cost
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indicates maximum combinations of goods and services an economy can produce given its available resources and technology
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production-possibilities curve
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If soceity is efficient, it can produce more of one good only if it ___________ output of another good
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reduces
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___________ the production of a particular good will cause the price of the good to rise
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Increasing
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maximum output of a good produced from the available resources
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efficiency
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Every point on the production-possibilities curve is considered to be:
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efficient
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An economy producing inside the production-possibilites curve causes:
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inefficiency
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A technological adance would best be represented by a shift ____________ of the production-possibilities curve.
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outward
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Which of the following will cause the production-possibilities curve to shift inward? A) An increase in population. C) A decrease in the size of the labor force. B) A technological advance. D) An increase in knowledge.
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C
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In a market economy, the question of WHAT to produce is answered by
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producer profits and sales
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In a market economy, the question of HOW to produce is determined by
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the least-cost method
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The use of market prices and sales to signal desired output and allows buyers to communicate with producers indirectly
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market mechanism
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the allocation of resources by market forces
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invisible hand
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Who would advocate a laissez faire economic policy?
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Adam smith
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Wrote "The Wealth of Nations" which described the virtues of market-based economies
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Karl Marx
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utilizes both market and nonmarket signals to allocate goods and services
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mixed economy
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What is used to correct market failure?
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laws and regulations
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Pollution is an example of what?
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market failure
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The collapse of communism is evidence of what?
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government failure
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Focuses on the performance of the overall economy
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macroeconomics
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The study of microeconomic theory focuses on the: A) Interaction of international trade and domestic production of goods and services. B) Operation of the entire economy. C) Role of the banking system in the economy. D) Structure and performance of markets and the operation of the price system.
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D
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other things remain equal
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ceteris paribus
