1.1- The economic problem Flashcards
What is the economic problem?
The economic problem refers to the issue of scarcity, where limited resources are available to meet unlimited wants and needs.
True or False: Scarcity is a situation where resources are abundant.
False
What are the three basic economic questions?
What to produce, how to produce, and for whom to produce.
Fill in the blank: The allocation of resources is primarily determined by ___ in a market economy.
supply and demand
Define opportunity cost.
Opportunity cost is the value of the next best alternative forgone when making a decision.
Multiple Choice: Which of the following is NOT a factor of production? A) Land B) Labor C) Money D) Capital
C) Money
What does the term ‘allocation of resources’ mean?
It refers to the process of distributing available resources among various uses.
True or False: In a command economy, the government makes all economic decisions.
True
What is meant by the term ‘economic efficiency’?
Economic efficiency occurs when resources are used in a way that maximizes output and minimizes waste.
Fill in the blank: The study of how individuals and firms make decisions about the allocation of scarce resources is known as ___ economics.
microeconomics
What is the role of prices in a market economy?
Prices signal to consumers and producers how to allocate resources efficiently.
Multiple Choice: Which of the following best describes a market economy? A) Government controls production B) Private individuals control production C) No one controls production D) Random allocation
B) Private individuals control production
True or False: Resources are unlimited.
False
What is a production possibility frontier (PPF)?
A PPF is a graph that shows the maximum possible output combinations of two goods that can be produced with available resources.
Fill in the blank: The slope of the production possibility frontier represents the ___ cost.
opportunity
What does it mean if an economy is operating inside the PPF?
It indicates that the economy is not utilizing all its resources efficiently.
Multiple Choice: Which scenario illustrates a trade-off? A) Buying a new car instead of going on vacation B) Having both a car and a bike C) Increasing production without any costs D) None of the above
A) Buying a new car instead of going on vacation
Define the term ‘scarcity’.
Scarcity is the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.
What is the significance of the concept of ‘rational behavior’ in economics?
Rational behavior assumes that individuals make decisions aimed at maximizing their utility or satisfaction.
True or False: All societies face the economic problem.
True
What is the relationship between scarcity and choice?
Scarcity necessitates choice, as individuals and societies must decide how to allocate limited resources among competing uses.
Fill in the blank: In economics, the term ‘utility’ refers to the ___ derived from consuming goods and services.
satisfaction
What is a trade-off?
A trade-off is the idea that in order to gain something, you must give up something else.
Multiple Choice: Which of the following is an example of a scarce resource? A) Air B) Water C) Time D) Both B and C
D) Both B and C
