chapter 1

Question 1

economics

Answer 1

the study of how people manage their resources to meet their needs and enhance their well-being

Question 2

well-being

Answer 2

a term used to refer broadly to a good quality of life

Question 3

positive questions

Answer 3

questions about how things are

Question 4

normative questions

Answer 4

questions about how things should be

Question 5

intermediate goal

Answer 5

a goal that is desirable because its achievement will bring you closer to your final goal(s)

Question 6

final goal

Answer 6

a goal that requires no further justification; it is an end in itself

Question 7

negative extenalities

Answer 7

harmful side effects, or unintended consequences, of economic activity that affect those who are not directly involved in the activity

Question 8

positive externalities

Answer 8

beneficial side effects, or unintended consequences, of economic activity that accrue to those who are not among the economic actors directly involved in the activity

Question 9

gross domestic product (GDP)

Answer 9

the market value of all final goods and services produced within a country’s borders over a specific time period, normally one year

Question 10

economic efficiency

Answer 10

the use of resources, or inputs, such that they yield the highest possible value of output or the production of a given output using the lowest possible value of inputs

Question 11

subjective well-being (SWB)

Answer 11

a measure of welfare based on survey questions asking people about their own degree of life satisfaction

Question 12

resource management

Answer 12

preserving or improving the resources that contribute to the enhancement of well-being, including natural, manufactured, human, and social resources

Question 13

production

Answer 13

the conversion of resources into goods and services

Question 14

distribution

Answer 14

the sharing of products and resources among people

Question 15

exchange

Answer 15

the trading of one thing for something else

Question 16

transfer

Answer 16

the giving of something, with nothing specific expected into return

Question 17

consumption

Answer 17

the final use of a good or service

Question 18

scarcity

Answer 18

the concept that resources are not sufficient to allow all goals to be accomplished at once

Question 19

production-possibilities frontier (PPF)

Answer 19

a curve showing the maximum amounts of two outputs that society could produce from given resources, over a given period

Question 20

opportunity cost

Answer 20

the value of the best alternative that is forgone when a choice is made

Question 21

technological progress

Answer 21

the development of new methods of converting inputs (resources) into outputs (products or services)

Question 22

microeconomics

Answer 22

the subfield of economics that focuses on activities that take place within and among the major economic organizations of a society

Question 23

macroeconomics

Answer 23

the subfield of economics that focuses on the economy as a whole

Question 24

model

Answer 24

an analytical tool that highlights some aspects of reality while ignoring others

Question 25

circular flow diagram

Answer 25

a graphical representation of the traditional view of an economy consisting of households and firms engaging in exchange

Question 26

factor markets

Answer 26

markets for the service of land, labor, and capital

Question 27

product markets

Answer 27

markets for newly produced goods and services

Question 28

core sphere

Answer 28

households, families, and informal community groups

Question 29

business sphere

Answer 29

firms that produce goods and services for profitable sale

Question 30

public purpose sphere

Answer 30

governments as well as other organizations that seek to enhance well-being without making a profit