Macroeconomics Chapter 1: Economics: The Core Issue – Flashcards
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Capital, as economist use the term, refers to
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Final goods that are used to produce other goods and services.
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The role of the entrepreneur in an economy is to
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Bring the factors of production together and assume the risk of production.
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Opportunity cost may be defined as the
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Goods or services that are forgone in order to obtain something else.
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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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A point of a nation's production possibilities curve represents
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The full employment of resources to achieve a particular combination of goods and services.
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According to the law of increasing opportunity costs
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In order to produce additional units of a particular good, it is necessary for society to sacrifice increasingly larger amounts of alternative goods.
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The points on a production possibilities curve show
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Potential output.
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Which the following events would allow the production possibilities curve to shift outward?
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More teenagers enter the labor force.
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Which of the following will cause the production possibilities curve to shift inward?
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A decrease in the size of the labor force.
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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. It IS NOT those who need or want the goods or services the most or those who have the most political power.
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Adam Smith's invisible hand is now called
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The market mechanism.
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The doctrine of laissez faire is based on the belief that
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Markets are likely to do a better job of allocating resources than government directives.
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Which of the following can be used to correct market failure?
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Laws and regulations. Market failure IS NOT corrected by the market mechanism, laissez faire price polices, or government failure.
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If market signal result in pollution beyond the optimal level, then
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The market mechanism has failed to achieve social efficiency.
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Which of the following is not a macroeconomic statement?
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Jenny's wage rate rose, and in response, she decided to work more hours. This is a microeconomic statement. Macroeconomic statements would be: The unemployment rate for the United States rose to 5 percent in the last quarter, the Federal Reserve lowered interest rates at its last meeting, and congress increased the minimum wage rate in January.
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Using Figure 1.3 and PP1, an increase in the capacity to produce can be represented by a movement from
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Point C to Point F.
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Using Figure 1.3 and PP1 at Point A,
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There is inefficient use of available resources.
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Which of the following is true about the combination of mops and brooms represented by point E ing Figure 1.3 and using PP1?
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Point E is attainable only if more resources become available or technological advances are made.
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An increase in the proportion of the population that is unemployed above the normal rate is best represented in Figure 1.3 and using PP1 by a movement from Point
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C to Point A.
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A movement from point F to point D in Figure 1.3 results in
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A reallocation of resources from broom production to mop production.
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In Figure 1.3, a shift of the production possibilities curve from PP1 to PP2 could be caused by
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The use of improved production technology.
