Chapter 1 - Core Issues

Question 1

Scarcity

Answer 1

the fact that there aren’t enough basic resources available to satisfy all our desires.

Question 2

Factors of Production

Answer 2

Land
Labor
Capitol
Entrepreneurship

Question 3

Land

Answer 3

The first factor of production, land, refers not just to the ground but to all natural recourses

Question 4

Labor

Answer 4

When we speak of labor as a factor of production, we refer to the skills and abilities to produce goods and services.

Question 5

Capital

Answer 5

Final goods produced used in the final production of other goods, such as equipment and structures.

Question 6

Entrepreneurship

Answer 6

The assembling of resources to produce new or improved products and technologies.

Question 7

Economics

Answer 7

The study of how best to allocate scarce resources among competing uses.

Question 8

Opportunity Cost

Answer 8

The most desired goods and services that are forgone to obtain something else.

Question 9

Production Possibilities

Answer 9

The alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology.

Question 10

Production Possibility Curve (PPC)

Answer 10

Each point on the production possibility curve depicts a alternative mix of outputs that could be produced.

Question 11

Production Possibility Curve Illustrates

Answer 11

Two essential resources - Scarce resources and Opportunity Costs.

Question 12

Efficiency

Answer 12

Maximum output of a good from the resources used in production.

Question 13

Inefficiency

Answer 13

Whenever we’re producing inside the production possibilities curve, we are forgoing the opportunity of producing (and consuming) additional output.

Question 14

Economic Growth

Answer 14

An increase in output (real GDP); an expansion of production possibilities.

Question 15

Three Basic Decisions

Answer 15

WHAT to produce
HOW to produce
FOR WHOM to produce

Question 16

Market Mechanism

Answer 16

The use of market prices and sales to signal desired outputs (or resources allocations). Also answers the question of WHAT, HOW and FOR WHOM

Question 17

Laissez Faire

Answer 17

The doctrine of “leave it alone,” of nonintervention by government in the market mechanism.

Question 18

Mixed Economy

Answer 18

An economy that uses both market signals and government directives to allocate goods and resources.

Question 19

Market Failure

Answer 19

An imperfection in the market mechanism that prevents optimal outcome.

Question 20

Economic Failure

Answer 20

Government intervention that prevents that fails to improve economic outcomes.

Question 21

Macroeconomics

Answer 21

The study of aggregate economic behavior, of the economy as a whole.

Question 22

Microeconomics

Answer 22

The study of individual behavior in the economy, of the components of the larger economy.

Question 23

Ceteris Paribus

Answer 23

The assumption of nothing else changing.