Chapter 1 and 2 Flashcards
The branch of economics that focuses on decision making for the economy as a whole is called
Macroeconomics
Human wants
are unlimited
Scarcity is
a problem that exists in every economy
A tractor is an example of which of the following factors of production?
Capital
Which of the following is a resource or factor of production?
Land, labor, entrepreneurship, capital (all of the above)
Which of the following is the best example of a nonrenewable resource?
Crude oil or natural gas
Which of the following is the best example of a microeconomic topic?
The analysis of Ford Motors’ competitiveness in the automobile industry
An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, ceteris paribus. The phrase “ceteris paribus” means that
other relevant factors like consumer incomes, population, etc must be held constant
When economists use the term ceteris paribus, they are indicating that
all other variables except the ones specified are assumed to be constant
Which of the following represents a positive economics statement?
A very high income tax rate will reduce the amount of time that people spend working. It will also lead to higher level of underground economy.
The statement “Violent crime (statistics show) has decreased in the last five years,” is
positive because it is testable
Statistics show that an increase in the federal minimum wage causes an increase in unemployment among teenagers is
a positive economics statement
The fundamental question(s) every society asks/answers are
How to produce, what to produce, for whom to produce (all of the above)
Which fundamental economic question requires society to choose the combination (mix) of resources (factors of production) in order to produce goods and services?
The how to produce question
The opportunity cost of making a decision (by an individual or a society) is
the best alternative that was sacrificed
The opportunity cost of an action taken by an individual/society is
the value of the best opportunity that must be sacrificed in order to take the current action
If an economy is operating at a point inside the production possibilities curve,
its resources are not being used efficiently
A point outside the production possibilities curve represents a combination of goods that is
unattainable
Which of the following will be most likely to cause the production possibilities curve for a country short toward?
A decrease in the stock of physical capital
Any point on the production possibilities curve illustrates
maximum production possibilities
A production possibilities curve (ppc) or production possibilities frontier (ppf) shows the various
combinations of goods the economy has the capacity to produce
If an economy keeps increasing its capital stock/number of workers/technology/natural resources, then over time its production possibilities curve will
shift to the right
Compare two economies A and B that start out with identical production possibiliers curves. Economy A chooses an efficient point with 10 consumption/consumer goods (more consumer goods as compared to economy B) and 5 capital/producer/industrial goods, while economy B also chooses an efficient point, but with 6 consumption/consumer goods and 9 capital/producer/industrial goods. In the future we can predict
economy B will grow faster than economy A
Economic growth may be represented by a(n)
outward shift of a production possibilities curve
From an economic standpoint, government intervention is justified when
the market mechanism fails to achieve the optima mix of output
Using the above figures, suppose point C represents the optimal mix of output for a society. If market forces cause society to produce at point D then the society may allow the government to intervene in the economy; such a government intervention could
move the production to the optimal level C, move the production to point B in the diagram, move the production point to A in the diagram (all of the above)
