Chapter 1

Question 1

S1) Need

Answer 1

Sometime essential for survival

Question 2

S1) Want

Answer 2

Something that people desire but that is not necessary for survival

Question 3

S1) Goods

Answer 3

The physical objects that someone produces

Question 4

S1) Services

Answer 4

The actions or activities that one person performs for another

Question 5

S1) Scarcity

Answer 5

The principle that limited amounts of goods and services are available to meet unlimited wants

Question 6

S1) Economics

Answer 6

The study of how people seek to satisfy their needs and wants by making choices

Question 7

S1) Shortage

Answer 7

A situation in which consumers want more of a good or service than produces are willing to make available at a particular price

Question 8

S1) Entrepreneur

Answer 8

A person who decides how to combine resources to create goods and services

Question 9

S1) Factors of production

Answer 9

The resources that are used to make goods and services

Question 10

S1) Land

Answer 10

All natural resources used to produce goods and services

Question 11

S1) Labor

Answer 11

The effort people devote to tasks for which they are paid

Question 12

S1) Capital

Answer 12

Any human-made resource that is used to produce other goods and services

Question 13

S1) Physical capital

Answer 13

The human-made objects used to create other goods and services

Question 14

S1) Human capital

Answer 14

The knowledge and skills a worker gains and through education and experience

Question 15

S2) Trade-off

Answer 15

The act of giving up one benefit in order to gain another, greater benefit

Question 16

S2) “Guns or butter”

Answer 16

A phrase expressing the idea that a country that decides to produce more military goods (“goods”) has fewer resources to produce consumer goods (“butter”) and vice versa

Question 17

S2) Opportunity cost

Answer 17

The most desirable alternative given up as the result of a decision

Question 18

S2) Thinking at the margin

Answer 18

The process of deciding whether to do or use one additional unit of some resource

Question 19

S2) Cost/benefit analysis

Answer 19

A decision-making process in which you compare what you will sacrifice and gain by a specific action

Question 20

S2) Marginal cost

Answer 20

The extra cost of adding one unit

Question 21

S2) Marginal benefit

Answer 21

The extra benefit of adding one unit

Question 22

S3) Production possibilities curve

Answer 22

A graph that shows alternative ways to use an economy’s productive resources

Question 23

S3) Production possibilities frontier

Answer 23

A line on a production possibilities curve that shows the maximum possible output an economy can produce

Question 24

S3) Efficiency

Answer 24

The use of resources in such a way as to maximize the output of goods and services

Question 25

S3) Underultillization

Answer 25

The use of fewer resources than an economy is capable of using

Question 26

S3) Law of increasing costs

Answer 26

An economic principle which states that as production shifts from making one good or service to another, more and more resources are needed to increase production of the second good or service