Chapter 1 Flashcards
Which of the following is NOT considered a “factor of production” in economics?
a) the espresso machine at your local cafe
b) the barista who makes the coffee
c) the espresso drink you purchase
d) the wood stir sticks
e) the land on which the cafe sits
c) the espresso drink you purchase
scarcity is likely to be
a) a problem that will be solved by the proper use of available resources
b) unique to the twenty-first century
c) a problem that will always exist
d) a result of the work ethic
e) eliminated with a better understanding of economics
c) a problem that will always exist
which of the following statements best describes the underlying feature of most economic problems?
a) people have unlimited wants in the face of limited resources
b) there are unlimited resources
c) resources are distributed fairly
d) people have limited wants in the face of limited resources
e) government should never interfere in the workings of a market economy
a) people have unlimited wants in the face of limited resources
which of the following best completes the definition of opportunity cost? the opportunity cost of choosing any one alternative is the
a) market cost of the next best alternative
b) value of the next best alternative that is given up
c) the revenues that would be given up if that alternative is not chosen
d) value of all other alternatives combined
e) value of resources used to make that alternative available to the market
b) value of the next best alternative that is given up
With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway
b) 50 km of highway repair
with a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway
c) the opportunity cost of the highway repair is 4 search and rescue helicopters
- Refer to figure 1-2. Suppose the school board chooses to allocate all $500,000 to the purchase of laptop computers. What is the opportunity cost of this entire purchase?
b) the opportunity cost is $20,000 textbooks
- the table below illustrates that, in one day, Tristan’s opportunity cost of producing one finishing lure?
d) 1/4 of a mowed lawn
- the table below illustrates that, in one day, Tristan can produce either 12 fishing lures or mow 3 lawns, while Thomas can produce either 6 fishing lures or mow 6 lawns
b) 1 mowed lawn
Suppose you own a courier service and you use two types of delivery vehicles - model A, which costs $30,000 to purchase, and model B, which costs $50,000 to purchase. You have a budget of $300,000 for the purchase of new vehicles. What is the opportunity cost of one Model A vehicle
b) 3/5 of a model b vehicle
Katie and hugh are producing pies and jars of pickles. Katie can produce either 200 jars of pickles or 100 pies per month. Hugh can produce either 800 jars of pickles or 200 pies per month. Which of the following statements is correct?
a) Katie’s opportunity cost of producing 1 jar of pickles is 2 pies
b) katie’s opportunity cost of producing 1 jar of pickles is 1/2 of a pie
c) hugh’s opportunity cost of producing 1 jar of pickles is 4 pies
d) hugh’s opportunity cost of producing 1 pie is 1/4 jar of pickles
e) hugh and katie’s opportunity costs of producing are the same
b) katie’s opportunity cost of producing 1 jar of pickles is 1/2 of pie
define economics
the study of the use of scarce resources to satisfy unlimited human wants
define factors of production
resources used to produce goods and services; frequently divided into the basic categories of land, labour, and capital
define goods
tangible products, such as cars or shoes
define services
intangible products, such as legal services and education
define production
the act of making goods or services
define consumption
the act of using goods or services to satisfy wants
what does scarcity imply?
choices must be made and making choices implies the existence of costs
when do opportunity costs occur?
every time a choice is made
define opportunity cost
the value of the next best alternative that is forgone when one alternative is chosen
define a production possibilities boundary
a curve showing which alternative combination of output can be attained if all available resources are used efficiently; it is the boundary between attainable and unattainable output combinations
what concepts does a PPB illustrate?
- scarcity (unattainable combinations outside boundary)
- choice (need to choose among the alternative attainable points)
- opportunity cost (negative slope)
define resource allocation
the allocation of an economy’s scarce resources among alternative uses
define microeconomics
the study of the causes and consequences of the allocation of resources as it is affected by the workings of the price system
define macroeconomics
the study of the determination of economic aggregates such as total output, employment, and growth
an economy based on free-market transactions is _______________
self-organizing
maximizing consumers/producers make _______ _______ to achieve objectives
marginal decisions
define specialization of labour
the specialization of individual workers in the production of particular goods or services
define division of labour
the breaking up of a production process into a series of specialized tasks each done by a different worker
define barter
An economic system in which goods and services are traded directly for other goods and services
specialization must be accompanied by _____
trade
what does money facilitate
trade, which then facilitates specializations
define traditional economy
an economy in which behavior is based mostly on tradition
define command economy
an economy in which most economic decisions are made by central planning authority
define free-market economy
an economy in which most economic decisions are made by private households and firms
define mixed economy
economy in which some economic decisions are made by firms and households and some by the government
in practice, every economy is a _______ economy
mixed
key institutions
- private property
- freedom of contract
what are the 4 basic questions in all economies?
1) what is produced and how?
2) what is consumed and by whom?
3) why are resources sometimes idle?
4) is productive capacity growing
