Chapter 1 Flashcards
A country must decide whether to use its steel to build new fighter jets or new sports cars. This is an example of what decision?
“Guns or Butter” decision
The resources used to make all goods and services.
Factors of production
The government of a country must make a decision between increasing military spending and subsidizing wheat farmers. What kind of decision is this?
Guns or butter issue
Limited amount of what is an example of a shortage?
Food available because the trucks carrying it are on strike.
A nation’s automakers install new robotic machinery to build cars. Now, cars take only a day to make, and the factories can produce many more cars than before. What causes this example of economic growth?
Technology
What does a production possibilities frontier show?
The maximum amount that an economy can produce.
What is one example of an entrepreneur?
An artist who runs a business painting murals in office buildings and restaurants.
What is a factory building an example of?
Physical capital
What is the purpose of a production possibilities graph?
To show alternative ways to use an economy’s resources.
Why are all goods and services scarce?
All resources are scarce.
The lack of what represents a scarcity?
Enough workers to finish two jobs because there’s a limited supply of workers.
What can a decision-making grid do?
Help you determine some of the opportunity costs for your decision.
How would you describe an economy that uses its resources to make the greatest possible number of goods and services?
Efficient
What can you use to examine the opportunity cost of a decision?
Production possibilities graph
What does an efficient economy do?
Uses its resources to make the most goods and services.
The community of Desertville traditionally produces a large number of tires and a small amount of kiwi fruit. Kiwis are becoming increasingly popular and Desertville has decided to expand kiwi cultivation and decrease tire manufacturing. What will happen according to the law of increasing costs?
The cost of producing kiwis will increase.
What does human capital include?
A taxi driver’s knowledge of the city streets.
What are resources made by humans and used to create other goods and services called?
Capital
What is the opportunity cost of a decision?
The most desirable alternative given up for the decision.
What kind of decision is made when deciding whether or not to hire new workers?
Decision made at the margin
What makes someone an entrepreneur?
Running a service that hires people to install sprinkler systems in lawns.
A country’s production possibilities increase because the available workers become more skilled at using a computer. What causes this example of growth?
Technology
The government of a country must make a decision between spending money on a hospital or spending it on border security. What kind of decision is this?
Guns or butter
A company that makes baseball caps is underutilizing its resources. What does this mean?
The company is producing fewer caps than it could be.
The law of increasing costs means that when an economy increases the production of one item…_________.
The production costs will increase also.
