Economics Chapter 1 Test Answers – Flashcards
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What is economics?
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The study of how people make choices about ways to use limited resources to fulfill peoples unlimited wants.
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The branch of economic theory dealing with the economy as a whole and decision making by large units of government.
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Macroeconomics.
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The branch of economic theory that deals with behavior and decision making by small units such as individuals and firms.
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Microeconomics.
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What is scarcity?
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Basic economic problem that results from a combination of unlimited resources and unlimited wants.
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What are the two scarcest resources?
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Time and money.
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What are the four factors of production?
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Land, Labor, Capital, And Entrepreneurship.
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What has come to be considered the fifth factor of production?
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Technology.
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What is land?
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Natural resources and surface land and water.
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What is labor?
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Human effort directed toward producing goods and services.
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What is capital?
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Previously manufactured goods used to make another goods and services.
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The amount of output (goods and services) that results from a given level of inputs (land, labor, capital and entrepreneurship).
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Productivity.
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When individuals take risks to develop new products and start new businesses in order to make profits is called?
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Entrepreneurship.
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The use of science to develop new products and new methods for producing and distributing goods and services is called?
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Technology.
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Who is the father of modern economics?
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Adam Smith.
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What is a trade-off?
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Sacrificing one good or service to purchase or produce another.
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Give one example of a trade-off.
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Studying an extra hour, you give up the hour to do anything else.
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The value of the next best alternative given up for the alternative that was chosen is called?
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Opportunity cost.
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What does a production possibilities curve show?
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Max combination of goods and services that can be produced from a fixed amount of resources in a given period of time.
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The production and distribution of goods and services in a society is what?
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Economy.
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A theory or simplified representation that helps explain and predict economic behavior in the real world.
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Economic Model.
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How might an economic model come to be considered reliable enough for businesses and governments to use when making economic choices?
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They help analyze the way the real world works.
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What is the most common economic model?
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Line graphs.
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Name one reason why economists do not all agree on theories?
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Their personal opinions and beliefs may nonetheless influence how they view those facts and fit them into theories.
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Way in which a nation uses its resources to satisfy its people's wants and needs is its?
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Economic Syetem.
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What is the process of freely exchanging goods and services between buyers and sellers?
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Market.
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What are the three basic questions every economic system must answer?
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What goods and services should be produced? How should they be produced? Who should share in what's produced?
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What are the four types of economic systems?
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Mixed, Market, Traditional, and Command.
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The U.S. is what type of economic system?
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Mixed market system.
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Which two types of economic systems create our mixed system?
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Pure Market and Command.
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How are the three basic questions answered in a traditional system?
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Accodring to tradition, things are done "the way they've always been done."
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Who answers the basic economic questions in a command system?
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Government.
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How are the three basic questions answered in a market system?
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By individuals looking out for their own and their families best interests.
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What is a disadvantage of a traditional system?
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Punishment if you try to change the way of doing something.
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What is a disadvantage of a command system?
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Government leaders control the factors of production and make all decisions.
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What is an advantage of a market system?
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Economic decisions are made by individuals.
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Economic model that pictures income as flowing continuously between business and consumers?
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Circular flow of income and output.
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Why is the U.S. a mixed system?
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Most decisions are made by individuals reacting as participants within the market.
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Economic system in which private individuals own the factors of production?
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Capitalism.
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What does Laissez-faire mean?
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It means "Let people do as they choose." Lets people and businesses make their own economic decisions.
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What is one role the government plays in the economy?
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National defense and keeping the peace.
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What is a free-enterprise system?
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Economic system in which individuals own the factors of production and decide how to use them within legal limits.
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The desire to make money that motivates people to produce and sell goods and services is called?
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Profit incentive.
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Rivalry among producers or sellers of similar goods and services to win more business is called?
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Competition.
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Whatever is owned by individuals rather than by government is considered?
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Private property.
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What is economic efficiency?
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Wise use of available resources so as to obtain the greatest benefits possible.
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What is the attempt to balance an economic policy so that everyone benefits fairly?
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Economic equity.
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What is standard living?
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The material well-being of an individual, group, or nation measured by how well their necessities and luxuries are satisfied.
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The expansion of the economy to produce more goods, jobs and wealth is?
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Economic growth.
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What could cause a store to go out of business?
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If they don't follow legal restrictions set by the government.
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What could cause people to lose their jobs?
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If they produce something consumers won't buy.
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Name one responsibility of Americans?
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Pay bills, take care of yourself and family, elect good representatives.
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What is socialism?
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A system in which the government owns the major factors of production and attempts to manage output and the distribution of goods.
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What is communism?
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Term used by Karl Marx for his idolized society in which no government is necessary.
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What is a disadvantage of socialism?
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Continual struggle between various groups, or classes, in society.
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What is one benefit of socialism?
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The government attempts to manage production and especially the distribution of goods.
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What is a benefit of capitalism?
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Allows more efficiency in the market place and for greater rates of economic growth.
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What is a disadvantage of capitalism?
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Capitalists exploited the proletariat, or used them unfairly.
