Chapter 1

Question 1

Economy comes from… (meaning)

Answer 1

the greek word “one who manages a household”

Question 2

Define Scarcity

Answer 2

Condition that results from inability of limited resources to satisfy unlimited wants.

Question 3

Examples of unlimited wants and limited resources?

Answer 3

wants - money, utilities, food, affection, entertainment, etc… / resources - land, capital, labor, and Entrepreneurship

Question 4

Economic problems occur why…?

Answer 4

Human wants are greater than Resources needed

Question 5

Choices depend on ___ we face. Everyone faces ___.

Answer 5

Incentives / Scarcity

Question 6

Economics is the study of…?

Answer 6

choices that a society (individual, business, government, etc.) makes to attain its goals, given the scarce resources

Question 7

What are the 3 fundamental questions of Economics?

Answer 7

1) What, and how much, to produce? 2) How to produce? 3) Who to produce for?

Question 8

Economics is the study of…? (one word answer)

Answer 8

Choices

Question 9

Who makes economic Decisions?

Answer 9

Consumers / Producers / Government

Question 10

Economics is broken into two groups…

Answer 10

Microeconimcs and Macroeconomics

Question 11

Define & give info on Microeconimcs

Answer 11

study of the economy at the small-scale level (individuals & specific markets) / How ind peeps & firms make choices - interact in the market & how GOV influence their choices

Question 12

Define & give info on Macroeconomics

Answer 12

study of economy at large-scale level (total output, price level, & other total measures) / Includes economy as whole. Investigates national income, inflation, unemployment, interest rate, exchange rate, etc..

Question 13

Examples of Microeconomics

Answer 13

Rent control on tenants / gasoline tax for automobile owners / A hurricane causing gas spikes across the country

Question 14

Examples of Macroeconomics

Answer 14

Increase of FED min wage / FED tax revenues of a plan / North American Free Trade Agreement

Question 15

Microeconomics focuses on how…?

Answer 15

GOVs , individuals, and businesses make decisions when faced with scarcity.

Question 16

What are the 4 basic resources used to produce goods and services?

Answer 16

Natural Resources / Labor / Capital / An Entrepreneur

Question 17

Whats Capital? (as in resources)

Answer 17

ummm… la curcharucha? (machianry)

Question 18

What are 3 key economic ideas? (ways of thinking)

Answer 18

People r rational / People respond to economic incentive / Optimal decisions are made at the margin

Question 19

What does “People are rational” mean?

Answer 19

Use all available info to achieve goals / Choose an action if profit > cost, decisions to maximize our pleasure

Question 20

What does “People respond to economic incentive” mean?

Answer 20

GOV uses incentive to implement policy / Change in tax can change behavior

Question 21

What does “Optimal decisions are made at the margin” mean?

Answer 21

Marginal analysis / Activities are continued up to MB=MC

Question 22

Define Marginal Analysis

Answer 22

Examination of the effects of additions to or subtractions from a current situation

Question 23

Define Marginal Benefit

Answer 23

additional benefit associated w/ one more unit of an activity.

Question 24

Define Marginal Cost

Answer 24

additional cost associated w/ one more unit of an activity

Question 25

Explain MB and MC

Answer 25

Basically if the benefit is greater than the cost (or risk) do it more, if not... don't.

Question 26

What are 3 fundamental constraints when making a decision?

Answer 26

Scarcity / Tradeoff / Opportunity Cost

Question 27

Define Opportunity Cost.

Answer 27

highest-valued alt that must be given up to engage in an activity.

Question 28

Examples of Opportunity Cost?

Answer 28

You work overtime, your leisure time that is sacrificed / You receive $400 for your bday. You buy a CD instead of purchasing lunches for a week. The OC of the CD is the lunches given up.

Question 29

3 types of Economy?

Answer 29

Centrally planned / Market economy / Mixed economy

Question 30

Define a Centrally Planned economy.

Answer 30

GOV decides how economic resources will be allocated

Question 31

Define a Market economy

Answer 31

HH and firms interact in the market and allocate economic resources

Question 32

Define a Mixed economy

Answer 32

Market works but GOV plays major roles

Question 33

What's are Positive Econimcs

Answer 33

Economic facts / Uses scientific method to uncover basic mechanism of da economy. It describes the way this world is. Might be right or wrong

Question 33

What are Negative Economics

Answer 33

Subjective perspective of the economy / Seeks to prescribe the way the world SHOULD BE

Question 34

Economics is generally concerned with _____ economics.

Answer 34

Positive

Question 35

Who made economics a social science?

Answer 35

Adam Smith

Question 36

Question and Answer to Adam Smith's question?

Answer 36

Why are some nations wealthy while others are poor? / division of labor and free markets.

Question 37

What are the Economic models used?

Answer 37

Tables, Graphs, & Math Equations

Question 38

Define Production Possibilities Frontier.

Answer 38

Curve that shows MAX attainable combos of 2 outputs that may be produced w/ available resources & current tech

Question 39

Define Efficiency & Tradeoff (under PPF)

Answer 39

E - achieving as much output as possible from given amount of inputs/resources / T - producing more of 1 good/service means producing less of another good/service

Question 40

Law of Increasing Opportunity Cost

Answer 40

In order to get more of something, one must give up ever-increasing quantities of something else

Question 41

Example of Increasing Law of Opportunity Cost?

Answer 41

To produce 1 more car the economy must produce 5 fewer computers

Question 42

Define Economic Growth

Answer 42

Ability of the economy to increase the production of goods and services.

Question 43

What is the Circular Flow Diagram? (What's in it?)

Answer 43

Households --> Factor Markets --> Firms --> Product Markets