Economics Chapter 1, 2, 3 – Flashcards
72 test answers
Unlock all answers in this set
Unlock answers 72question
All natural resources used for production. Earning = rent
answer
Land
Unlock the answer
question
Machinery, plant, and equipmenet used in production. An example is a hammer or assemly line. Earnings = interest
answer
Capital
Unlock the answer
question
Innovator or risk taker; person puts up money to start a new business. Earnings = profit
answer
Entrepreneurship
Unlock the answer
question
This type of profit needs to be earned just to stay in business; not a specific $ amount
answer
Normal profits
Unlock the answer
question
Profits earned that are over and above normal profits
answer
Excess profit
Unlock the answer
question
What are the three economic agents?
answer
Households, business firms, and government
Unlock the answer
question
A context in which the voluntary exchange between a buyer and a seller of a good or service takes place.
answer
Market
Unlock the answer
question
Use money to pay labor (income)
answer
Factor Payments
Unlock the answer
question
What are the four Economic Issues/Goals?
answer
Efficiency, Equity, Stability, Economic Growth
Unlock the answer
question
Making the best possible use of resources when trying to achieve something
answer
Efficiency
Unlock the answer
question
The efficient use of resources when producing a good or service
answer
Technical Efficiency
Unlock the answer
question
The efficient allocation of society's scarce resources
answer
Allocative Efficiency
Unlock the answer
question
What are four questions an economy must answer?
answer
What to produce, how to produce, how much, who is your market?
Unlock the answer
question
How do we determine which resources to allocate?
answer
by prices and competitive markets
Unlock the answer
question
After buying something, producers get "signal" on what consumers live and what makes profit
answer
Dollar votes
Unlock the answer
question
Refers to the way society's output is distributed. Is it fair? (this is an opinion)
answer
Equity
Unlock the answer
question
Payment from govt to a household in which the household does no corresponding work
answer
Transfer payment
Unlock the answer
question
What are the two variables of stability?
answer
Price and employment
Unlock the answer
question
Refers to the substantial and sustained increase in the nation's income or output. Roughly 5%
answer
Economic growth
Unlock the answer
question
Study of the determination of economic aggregates such as total employment, total output, and the price level. Deals with stability and growth
answer
Macroeconomics
Unlock the answer
question
Study of the efficient allocation of reltaively scarce resources and the distribution of income. Deals with equity and efficiency
answer
Microeconomics
Unlock the answer
question
Ignoring many details to focus on the most important elements of a problem
answer
Abstraction
Unlock the answer
question
Value of the benefit of the best alternative when a choice is made
answer
Opportunity cost
Unlock the answer
question
What is an example of an opportunity cost?
answer
If you have to choose between 80k or 90k and you choose 80k, the opportunity cost is 90,000
Unlock the answer
question
Statement that states what is - deals with facts and explanation
answer
Positive statement
Unlock the answer
question
Statement that involves a value judgement. Word "should" is used
answer
Normative statement
Unlock the answer
question
The value of the dependent variable when the independent variable equals zero (when line crosses vertical intercept).
answer
Vertical intercept
Unlock the answer
question
Shows the max alternative combinations of two goods that an economy can produce at a given time, with a given stock of resources, a given level of technology, and fully employed resources.
answer
Production Possibility Curve
Unlock the answer
question
What kind of slope do production possibility curves have?
answer
negative
Unlock the answer
question
what four functions do market prices perform?
answer
1. Determines resource allocations 2. Give consumers and suppliers a relative idea of value 3. Provide information about the future - price trends 4. Provide incentives to firms to provide goods and services as well as incentives to households to provide resources through labor
Unlock the answer
question
Tells us the quantity that consumers are willing and able to buy at all alternative market prices under all market conditions
answer
complete market demand function
Unlock the answer
question
What is the complete market demand function equation ?
answer
(Dx) = f(Px, Yc, Nc, Tc, Ps, Pc, Yd, Ec)
Unlock the answer
question
All other varibales held constant
answer
ceteris Paribus
Unlock the answer
question
Tells us the quantity that consumers are willing and able to buy at all alternative market prices, ceteris paribus
answer
Single market demand function
Unlock the answer
question
What is the one thing that is not held constant for ceteris paribus?
answer
Price
Unlock the answer
question
The last price a consumer will purchase the good
answer
Buyer's reservation price
Unlock the answer
question
Law that states in general, there is an inverse or negative relationship between the quanitity of (x) consumers are willing and able to buy and the price, c.p. -Demand curve slopes down to the right -Market does not have to provide product
answer
Law of Demand
Unlock the answer
question
What are the three reasons why law of demand holds true?
answer
Law of diminishing marginal utility, income effect, substitution effect
Unlock the answer
question
If we take an individual consumer and a bundle of quantities of a good, over the relevant range, marginal utility received will also be positive but declining as units of consumption increase.
answer
Law of Diminishing Marginal Utility
Unlock the answer
question
Satisfaction consumers receive from consuming a good
answer
Utility
Unlock the answer
question
Total satisfaction received from consuming a certain quantity of a good (example: eating a whole bag of chips in one sitting)
answer
Total utility
Unlock the answer
question
the extra utility that is brought about the addition of one more unit of the good
answer
Marginal utility
Unlock the answer
question
A price increase of good (x) will decrease the relative income of consumers
answer
Income effect
Unlock the answer
question
As the price of good (x) rises, consumers will purchase more of substitute good (w)
answer
Substitution effect
Unlock the answer
question
a good such that when a consumer's income rises, their demand for this good increases
answer
Normal good
Unlock the answer
question
A good such that when a consumer's income rises, their demand for this good decreases
answer
Inferior good
Unlock the answer
question
Tells us the quantitiy of a good that produces would be willing and able to supply at all alternative market prices and all alternative market circumstances
answer
Complete market supply function
Unlock the answer
question
What are the components of the complete market supply function equation?
answer
Px, Ns, Pr, Ti, Es
Unlock the answer
question
Tells us the quantity of a good that producers would be willing and able to supple at all alternative market prices, ceteris paribus
answer
Single market supply function
Unlock the answer
question
There is a direct relationship between the quantity of a good supplied and the price in the short run
answer
Law of supply
Unlock the answer
question
A period of time so short that the firm cannot change lal inputs by the same proportion. Fixed capital, can change labor
answer
Short run
Unlock the answer
question
A period of time in which a firm could vary all of its inputs by the same proportion
answer
Long run
Unlock the answer
question
As we add more of a variable resource to a fixed set of inputs with a fixed technology, the resulting output will increase over the relevant range, but at a decreasing rate
answer
Law of Diminishing Returns
Unlock the answer
question
Total amount of a product that produced during a given time period by labor
answer
Total Physical Product of Labor
Unlock the answer
question
Extra physical product resulting from the addition of one more unit of labor. Change in total quantity/change in labor
answer
Marginal physical product of labor
Unlock the answer
question
T or F: Our economy determines the allocation of resources through prices and competitive markets.
answer
True
Unlock the answer
question
T or F: Macroeconomics deals with the economic goals stability and equity
answer
False
Unlock the answer
question
What is an economic explanation for why most college aged movie stars do not attend college?
answer
The opportunity cost in terms of reduced income is too great
Unlock the answer
question
T or F: Abstraction is necessary in economics because there are so many variables to keep track of.
answer
True
Unlock the answer
question
T or F: This is an example of a positive statement: The Bison football team will win another national championship this year.
answer
False - positive statements deal with facts
Unlock the answer
question
A PPC shows...
answer
The maximum amounts of 2 goods which can be produced assuming the full and efficient use of available resources
Unlock the answer
question
Which concepts are not illustrated in the PPC?
answer
Price and consumption
Unlock the answer
question
T or F: Ice cream and chocolate sauce would be examples of substitute goods.
answer
False
Unlock the answer
question
A normative statement is one which is...
answer
Based on value judgments
Unlock the answer
question
Which is not held constant when a demand curve is drawn?
answer
Price of the product itself
Unlock the answer
question
When the price of good j increases, the demand for good k increases. this means that j and k are....
answer
Substitutes
Unlock the answer
question
The price of one good increases, there will be a decrease in demand for other product.
answer
Complimentary good
Unlock the answer
question
Most production possibility curves are concave to the origin
answer
True
Unlock the answer
