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Econ Chapter 1 Questions And Answers

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Scarcity
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not having enough resources to produce all of the things we would like to have
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Factors of production
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Land, Labor, Capital, Entrepreneurship
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Capital
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Final goods produced for use in the production of other goods, e.g., equipment, structures.
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Entrepreneurship
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The assembling of resources to produce new or improved products and technologies.
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Economics
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The study of how best to allocate scarce resources among competing uses.
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Opportunity cost
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The most desired goods or services that are forgone to obtain some-thing else.
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Production possibilities
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The alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology.
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Efficiency
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Maximum output of a good from the resources used in production.
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Economic Growth
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An increase in output (real GDP); an expansion of production possibilities.
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Market mechanism
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The use of market prices and sales to signal desired outputs (or resource allocations).
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laissez faire
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The doctrine of ”leave it alone,” of nonintervention by government in the market mechanism.
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mixed economy
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An economy that uses both market signals and government directives to allocate goods and resources.
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market failure
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An imperfection in the market mechanism that prevents optimal outcomes.
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government failure
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Government intervention that fails to improve economic outcomes.
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macroeconomics
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The study of aggregate economic behavior, of the economy as a whole.
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microeconomics
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The study of individual behavior in the economy, of the components of the larger economy.
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ceteris paribus
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The assumption of nothing else changing.
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Which of the following is not one of the three core economic issues that must be resolved?
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What to produce with unlimited resources
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In economics, scarcity means that:
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Society’s desires exceed the want-satisfying capability of the resources available to satisfy those desires
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Given that resources are scarce:
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Opportunity costs are experienced whenever choices are made
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Capital, as economists use the term, refers to:
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Final goods that are used to produce other goods and services
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Economics can be defined as the study of:
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How scarce resources are allocated to best meet society’s goals
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A production-possibilities curve indicates the:
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Maximum combinations of goods and services an economy can produce given its available resources and technology
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The production-possibilities curve illustrates:
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The limitations that exist because of scarce resources
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If an economy experiences increasing opportunity costs with respect to two goods, then the production-possibilities curve between the two goods will be:
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Bowed outward
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When an economy is producing efficiently it is:
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Getting the most goods and services from the available resources
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The points on a production-possibilities curve show:
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Potential output
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If an economy is producing inside the production-possibilities curve, then:
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It can produce more of one good without giving up some of another good
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A technological advance would best be represented by:
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A shift outward of the production-possibilities curve
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In a market economy, the people who receive the goods and services that are produced are those who:
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Are willing to pay the highest price
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The market mechanism may best be defined as:
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The use of market prices and sales to signal desired output
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The market mechanism:
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Works because prices serve as a means of communication between consumers and producers
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Macroeconomics focuses on the performance of:
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The overall economy
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Economic models are used by economists to:
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Predict economic behavior, develop economic policies, and explain economic behavior