Chapter 1-2

Question 1

Economics

Answer 1

the study of resource allocation

Question 2

environment

Answer 2

resource management, environmental protection, and habitat restoration and preservation

Question 3

viable

Answer 3

energy efficiency, subsidies, tax breaks, and carbon credit

Question 4

economic

Answer 4

smart growth, long range planning, cost savings, and cost of living

Question 5

equitable

Answer 5

fair taxation, business ethics, and worker’s rights

Question 6

social

Answer 6

quality of life, education, community development, equal opportunity, law and ethics

Question 7

bearable

Answer 7

environmental law, public involvement, reporting, and publishing

Question 8

theoretical models

Answer 8

Seek to drive verifiable implications about economic behavior under the assumption that agents maximize specific objectives subject to constraints that are well defined in the model, ie. seek to explain the world 

Question 9

Empirical models

Answer 9

Aim to verify the qualitative predictions of theoretical models and convert these predictions to precise, numerical outcomes, ie. seek to test the theoretical models

Question 10

Constrained optimization

Answer 10

The process of optimizing an objective function with respect to some variables in the presence of constraints of those variables

Question 11

Marginal benefit

Answer 11

The additional benefit arising from a unit increase in a particular activity

Question 12

Total benefit

Answer 12

The sum of marginal benefits

Question 13

Positive economics

Answer 13

Deals with what is, descriptive, implies testable hypotheses

Question 14

Normative economics

Answer 14

Deals with what should be, prescriptive, implies value judgment

Question 15

Micro economics

Answer 15

Studies the decisions of individuals as well as businesses with a bottom up approach

Question 16

Macro economics

Answer 16

Studies the decisions made by countries and governments with a top down approach

Question 17

Scientific method

Answer 17

A structured way of investigating and explaining the operation of the world by testing and verifying hypothesized relations

Question 18

Steps of the scientific method

Answer 18

Identify problem, gather data, hypothesis, experiment, analyze, report results

Question 19

Opportunity cost

Answer 19

The value of the next best alternative when a decision is made

Question 20

Cannot escape the forces of the free market

Answer 20

Attempts to repeal the laws of supply and demand may backfire

Question 21

Comparative advantage

Answer 21

The ability to produce a good or service for a lower opportunity cost than others

Question 22

Trade

Answer 22

Allows countries, firms, and individuals to exploit their comparative and absolute advantages to produce specific products in surplus

Question 23

Externalities

Answer 23

External indirect costs or benefits to an unrelated third-party that arises as an effect of other parties activity

Question 24

Income Inequality

Answer 24

The richer continue to get richer and the poorer continue to get poorer

Question 25

Marginal analysis

Answer 25

A method for calculating associated costs and potential benefits of an additional unit of a good or service

Question 26

Independent variable

Answer 26

Variable that is changed or controlled in a scientific experiment to test the effects on the dependent variable

Question 27

Dependent variable

Answer 27

Variable being tested and measured in a scientific experiment dependent on the independent variable

Question 28

Slope

Answer 28

Describes the steepness and directions of lines, rise over run, y over x

Question 29

Variable

Answer 29

A variable is an entity which changes or varies in a given system

Question 30

Gross domestic product, GDP

Answer 30

A monetary measure of the market value of all final goods and services produced in a specific time period

Question 31

Private enterprise economy

Answer 31

Direct government production of goods is rare, few industrial assets are publicly owned

Question 32

Closed economy

Answer 32

Imports and exports make up a smaller share of GDP than all other advanced, industrial nations

Question 33

Growing economy

Answer 33

Growth is subjective to business cycles and period of contraction

Question 34

Manufacturing economy

Answer 34

Assembling, welding, Baker, tailor

Question 35

Service economy

Answer 35

Housekeeping, tours, nursing, teaching

Question 36

Role of the government and economy

Answer 36

Making and enforcing the laws, regulating businesses, distribution of income, managing externalities, providing public goods

Question 37

Rivalrous-Excludable

Answer 37

Public goods: food, clothing, cars, parking spaces

Question 38

Rivalrous – non-excludable 

Answer 38

Common pool resources: fish, stocks, timber, coal

Question 39

Non-rivalrous - excludable

Answer 39

Club goods: cinemas, private parks, satellite TV

Question 40

Non-rivalrous – non-excludable

Answer 40

Public goods: free to air TV, air, national defense

Question 41

Natural capital

Answer 41

The world stocks of natural assets which include geology, soil, air, water, and all living things

Question 42

Human capital

Answer 42

Personal attributes considered useful in the production process that encompass employee knowledge, skills, know how, good health, and education

Question 43

Financial capital

Answer 43

Money, credit, and other forms of funding that build wealth for people and businesses