Econ 201 – Flashcard Questions And Answers
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All natural resources used in production are classified as the resource called...
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LAND
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The marginal benefit of an activity can be found by calculating the change in:
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total benefits as the level of the activity increases by one unit.
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Because...are scarce, individuals and societies must allocate them among competing uses.
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RESOURCES
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The optimal level of economic activity occurs when:
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the marginal benefit equals the marginal benefit.
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Because the world is characterized by scarcity, people must...the resources at their disposal to many competing uses.
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ALLOCATE
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How we choose to employ the...that are available to us ultimately determines which goods and services get produced.
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RESOURCES
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When you decide to turn off the bedroom light on your way to the kitchen so that you can save a little money on your electric bill, you are engaging in:
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marginal decision making
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Tomatoes represent a small subset of food, so tomatoes are relatively...scarce than food in general.
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MORE
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Energy is...scarce than wind energy.
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LESS
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A graph that shows the possible combinations of two different goods and services that can be produced with fixed resources and technology is the:
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production possibilities frontier
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The quality of an economic model can be measured by how well it reflects reality and whether it gives us insights that can be used in the real world.
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TRUE
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Because resources are..., they must be allocated between competing uses.
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SCARCE
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The marginal cost of an activity can be found by calculating the change in:
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total costs as the level of the activity increases by one unit.
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Drinkable water is relatively...scarce than water.
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MORE
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The production possibilities frontier shows (on the curve itself) the production combinations that are both...and...
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attainable, efficient
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The points on the production possibilities frontier show how we...our resources to the production of two different goods or services.
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allocate
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the value of the opportunity that you give up when you choose one activity instead of another.
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Opportunity cost is:
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Combinations in the exterior of the production possibilities frontier are:
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impossible to produce
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Because the world is characterized by scarcity, people must allocate the limited...at their disposal among many competing uses.
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resources
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The more of a good or a service that is consumed in a given period of time, the lower the...that is associated with each additional unit.
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marginal benefit
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Self-interest, marginal decision making, and optimization form the basis for:
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rational decision making
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Individuals and countries specialize because of differences in...
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opportunity costs
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Combinations in the interior of the production possibilities frontier are:
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possible but inefficient
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Combinations...the production possibilities frontier are impossible to produce with the current resources and technology.
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beyond
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As the amount of an activity increase, its marginal...falls and its marginal...rises.
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benefit, cost
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A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a...
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production possibilities frontier (PPF)
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When the opportunity cost associated with increasing the production of one good or service in terms of another is constant at every level of production, there is:
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constant opportunity cost
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On a PPF with Good X on the horizontal axis and Good Y on the vertical axis, we can say that the slope of the PPF (in absolute value) equals the opportunity cost of producing Good X. This is true because the slope:
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describes the trade-off resulting from the production of Good X in terms of Good Y.
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A waste of resources that could have been used to produce something else occurs when:
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MB < MC
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Combinations...the production possibilities frontier are possible but inefficient with current resources and technology.
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within
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Combinations...the production possibilities frontier are impossible to produce with the current resources and technology.
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outside
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If an activity is performed where the marginal benefit is greater than the marginal cost (MB > MC), there is:
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a net gain to the economy
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When resources are allocated in such a way that it is possible to increase the production of one good without decreasing the production of another, then the allocation of resources is ...
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inefficient
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when production is characterized by...opportunity costs, the resulting production possibilities frontier will be straight line.
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constant
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Economics is the study of how individuals and societies allocate...resources among many competing uses.
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scarce
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When resources are allocated in such a way that it is possible to increase the production of one good only by decreasing the production of another, then the allocation of resources is ...
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efficient
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Given the option of being self-sufficient or trading with others, as long as a...exists, there will be potential for trade to make both parties better off.
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comparative advantage
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Comparative advantage refers to:
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...being the lowest relative opportunity cost producer of a good.
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With trade, the person who benefits more is the person who trades at, or near, the other person's...cost.
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opportunity
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The practice of producing a single good or service rather than producing multiple goods or services is called...
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specialization
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Whether a good or a service will be traded depends largely on:
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the terms associated with the trade.
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The value of the next-best forgone alternative is the...
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opportunity cost
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opportunity cost
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As long as there are differences in...,there are comparative advantages, and there will be potential for trade to make both parties better off.
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When a producer has a low opportunity cost, that producer has an advantage in the market because:
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he or she will be able to sell at a lower price than other producers.
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The producer with the...relative opportunity cost has a comparative advantage and should specialize in the production of that good.
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lowest
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The benefit, or wealth, that accrues to a buyer or a seller as a result of trading one good, service, or resources for another is the:
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gains from trade.
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If the price is too..., producers will not be eager to sell, but buyers will be willing and able to buy.
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low
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if the demand for the good or service you produce decreases, its price and your income will decrease too.
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the harm in specializing is that:
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causes individuals and nations to become interdependent.
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specialization
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Focusing production entirely on one good or service leaves you susceptible to changes in the...
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market
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water, salt water, fresh water, bottled water
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least scarce to most scarce
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How we choose to employ the...that are available to us ultimately determines which goods and services get produced.
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resources
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how people make choices in a world of scarcity.
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economics is about:
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A model that concisely describes how goods, services, resources, and money flow back and forth in an economy is the:
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circular flow model
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In the circular flow model, only by buying resources can...produce the output they will sell to households to generate revenue.
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firms
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In economics, resources are also called:
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factors of production, inputs
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In the circular flow model, only by selling resources can...obtain the income they need to buy the products they want to consume.
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households
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The circular flow model shows how households and firms interact in two key markets: the...market and the...market.
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resource, product
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Suppose a farmer has three kinds of land for growing peaches; good, better, and best. As the farmer increases production, she will use the best land first, and costs will be low. At some point, she will run out of the best land and will have to start using the better land, and costs will be a little higher. This describes the:
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law of increasing opportunity costs
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In the circular flow model, only by selling...can households obtain the income they need to buy the products they want to consume.
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resources
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It is possible to operate outside the PPF, production possibilities frontier.
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with trade:
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the simple model of production assumes that the opportunity cost of production is...
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constant
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opportunity
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increasing opportunity
