Economics Chapter 1-2 Test Questions – Flashcards
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maximal attainable combinations of two products that may be produced by available resources and current technology
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What does a production possibilities frontier show?
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economic cost of using a factor or production is the alternative factor of the next most valuable thing
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The principle of opportunity cost is what?
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Rational and respond to incentives
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Economists assume that individuals are what?
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Additional or extra
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What does the term "marginal" mean in economics?
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what goods and services will be produced, how will they be made, and who will receive them?
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The three fundamental questions that any economy must address are what?
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at least $60,000
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Ted quits his 60,000 a year job to be a stay at home dad. What is the opportunity cost of his decision?
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Scarcity
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Term: The situation in which unlimited wants exceed the limited resources available to fulfill those wants
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Market
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Term: A group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade
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Economic growth
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Term: The ability of the economy to produce increasing quantities of goods and services
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Production possibilities frontier
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Term: A curve showing the maximum attainable combinations of tow products that may be produced with available resources and current technology
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absolute advantage
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Term: The ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources
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Factor markets
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Term: Markets for the factors of production, such as labor, capital, natural resources, and entrepreneurial ability
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production market
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Term: Markets for goods - such as computers - and services - such as medical treatment
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Circular flow diagram
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Term: A model that illustrates how participants in markets are linked
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property rights
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Term: The rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.
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Factors and production
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Term: The inputs used to make goods and services
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comparative advantage
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Term: The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors
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Entrepreneur
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Term: Someone who operates a business, bringing together the factors of production - labor, capital, and natural resources - to produce goods and services.
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Free market
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Term: A market with few government restrictions on how a good or service can be produced or sold or how a factor of production can be employed
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Opportunity cost
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Term: The highest-valued alternative that must be given up to engage in an activity
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Trade
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Term: The act of buying or selling
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Who will receive the goods and service produced
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The distribution of income primarily determines which of the fundamental economic questions?
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Increasing opportunity cost more and more as one good is produced
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A production possibilities frontier with a bowed outward shape indicates what?
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Some factors of productions are not equally suited to produce in more than one good or service
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Why does increasing opportunity cost along a bowed out production possibilities frontier occur?
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Allocative efficiency
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When production reflects consumer preferences, _____ occurs.
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Productive efficiency
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When goods and services are produced at the lowest possible cost, _______ occurs
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People are more concerned with satisfying government orders rather than consumers wants
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What is a problem inherent in centrally planned economies?
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It measures the opportunity cost in producing one more unit of the good
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The slope of a production possibilities frontier is what?
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An increase in either natural resources or labor
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An outward shift of a nation's production possibilities frontier can occur due to what?
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Competition and voluntary exchange
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What contributes to the efficiency of markets?
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Competition among sellers
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what Generates productive efficiency?
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Economic growth?
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An outward shift of a nation's production possibilities frontier represents what?
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Technological advancement
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Without an increase in the supplies of economic resources, how can a nation achieve economic growth?
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Economic benefits are distributed fairly
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In economics, the term "equity" means what?
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Trade-off between the two
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What correctly describes the relationship between economic efficiency and economic equity?
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Natural disaster, unemployment rate
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What would shift a nation's production possibilities frontier inward?
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A point inside the frontier; shifted inward
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The Great Depression of the 1930's, with a large number of workers and factories unemployed, would be represented in a production possibilities frontier graph by what?
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By employing more resources.
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Suppose there is some unemployment in the economy and society decides that it wants more of one good. How can we meet the demand?
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false
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True or False: Scarcity is a problem that will eventually disappear as technology advances
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true
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True or False: The sales revenue a seller receives from the sale of an additional unit of goods is called marginal revenue
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True
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True or False: If it costs Sinclair $300 to produce 3 suede jackets and $420 to produce 4 suede jackets, then the difference of $120 is the marginal cost of producing the 4th suede jacket.
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True
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True of False: When voluntary exchange takes place, both parties gain from the exchange
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True
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True of False: The government makes all economic decisions in a centrally planned economy
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False
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True or False: One desirable outcome of a market economy is that it leads to a more equitable distribution of income
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True
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True or False: One example of human capital is the amount of savings that you have
