Chapter 1: Intro

Question 1

What is Economics?

Answer 1

Social science that studies the choices people make as they cope with scarcity (& consequences of choices)

Question 2

Scarcity

Answer 2

describes inability to satisfy our wants; idea of limited resources

Question 3

What is our wants limited by?

Answer 3

productive resources that are available

Question 4

What is an incentive?

Answer 4

reward that encourages an action or a penalty that discourages once

Question 5

Economics is divided into 2 components…

Answer 5

1. Microeconomics
2. Macroeconomics

Question 6

What is microeconomics?

Answer 6

choices that individuals & businesses make, the way these choice interact in markets & influence of governments

Question 7

What is macroeconomics?

Answer 7

performance of the national economy & global economy

Question 8

Differentiate between goods & services

Answer 8

Goods - physical objects (e.g. phone)
Services - tasks performed by people (e.g. mechanic)

Question 9

What are the 4 factors of production?

Answer 9

Land - natural resources (e.g. minerals, oil, gas)
Labour - time & effort devoted to producing goods & services
Capital - tools, instruments, machines, & buildings used to produce
Entrepreneurship - Develop new ideas of production, business decisions, calculate risk

Question 10

The quality of labour is dependent on…

Answer 10

Human Capital - knowledge & skill that people obtain from education, job training, & work experience

Question 11

Which factor of production earns the most income

Answer 11

labour

Question 12

Consumption is dependent on…

Answer 12

• Income
  § Land earns rent
  § Labour earns wages
  § Capital earns interest
  § Entrepreneurship earns profit

Question 13

Self vs Social Interest

Answer 13

Self - choice is the best one available for you
Social - best for society as a whole

Question 14

Production is efficient if…

Answer 14

not possible to make someone better off without making someone else worse off

Question 15

Market Capitalism

Answer 15

Economic sx in which individual’s own land & capital & are free to buy & sell land, capital, & goods & services in markets

Question 16

Centrally Planned Socialism

Answer 16

economic sx in which the government owns land & capital, directs workers to jobs, & decides what, how, & for whom to produce
e.g. soviet union

Question 17

Today’s economy is considered a…

Answer 17

mixed economy (combo of market capitalism w/ government regulation)

Question 18

Name some key issues associated w/ market capitalism

Answer 18

• Big corps hold too much power & influence on government
  ○ Government can do a better job allocating resources & redistributing wealth
  ○ More regulation in social interest needed - less corporate greed
  ○ For every winner, there is a loser

Question 19

What is a trade off? Give an example

Answer 19

exchange giving up one thing to get something else
e.g. E.g. Choose how to spend Saturday - face trade off between studying & hanging out w/ friends

Question 20

What is rational choice?

Answer 20

compares cost & benefits; achieves the greatest benefit over cost for the person making the choice

Question 21

Something is considered beneficial if…

Answer 21

gain/pleasure

Question 22

Define opportunity cost

Answer 22

highest valued alternative that must be given up to get it

Question 23

What term describes the choice made by comparing the benefits of having a little more of something w/ the cost

Answer 23

Margin

Question 24

What is a marginal benefit? Give an example

Answer 24

benefit you receive when you increase an activity
○ E.g. extra night of studying may help boost grade

Question 25

What is a marginal cost?

Answer 25

opportunity cost (LOSS) you incur when you increase an activity E.g. marginal cost of studying one more night is the cost of no spending that night w/ your friends

Question 26

Humans act on ____ & make choices in response to ____

Answer 26

1. self interest 2. incentives

Question 27

What is the difference between a positive statement vs a normative statement?

Answer 27

Positive Statements - about what is - may be right or wrong; can be fact-checked Normative Statement - about what should be - depends on values; cannot be tested

Question 28

"planet is warming bc of the amount of coal were burning " is ______ statement

Answer 28

positive

Question 29

"we should cut out use of coal by 50%" is a _____ statement

Answer 29

normative

Question 30

positive statements is tested using.....

Answer 30

Economic Models - description of some aspect of the economic world that includes features needed for purpose at hand

Question 31

For each news item below, indicate whether it involves a what​, how​, or for whom question. “Fibre replaces aluminum in airplanes” “Air Canada reaches deal w/ pilots” “Asteroid Mission canceled”

Answer 31

1. how 2. for whom 3. what

Question 32

2. Which of the following illustrates an efficient outcome? A. Ted pays $10,000 for a new meat slicer that operates at double the speed of his old one B. Ted pays his workers a higher wage & his profit takes a dive C. Ted cuts the price of his sausages & his profit decreases D. Ted cuts the price of his sausages & his profit increases

Answer 32

D

Question 33

_____ is an example of ______. A.Interstate highway; land B. Margaret Atwood; labour C. Teenager who cuts lawns during summer holidays; entrepreneurship D. Banff Park; Capital

Answer 33

C

Question 34

You plan to travel to Europe this summer. If you do, you won't be able to take your usual summer job that pays ​$9,000 for the​ summer, and you​ won't be able to live at home for free. The cost of transportation is $2,000, visas cost $100, & living expenses cost $2,000. What is the opportunity cost of your plan to travel to Europe?

Answer 34

$13,100 - If u go to Europe you will loss this much money (all expenses added up + won’t be able to get the $9000 you would make at your job)

Question 35

Rational choice is a choice that uses the available resources to _____ of the person making the choice.

Answer 35

best achieve the objective

Question 36

A choice on the margin is a choice that is made by comparing all the relevant​ _____ systematically and​ _____. Marginal cost is the​ _____ that arises from one unit​ _____ in an activity. Marginal benefit is the​ _____ that arises from one unit​ _____ in an activity.

Answer 36

Alternatives, incrementally, opportunity cost, increase, benefit, increase

Question 37

How is economics used as a policy tool? A. Advise governments on normative goals for the economy B. Model different economic proposals proposed by the government C. Predict the effects of all the changes occurring in the economy at the same time D. Work to predict the outcome of normative statements

Answer 37

B

Question 38

The poor pay too much for housing is a ______ statement

Answer 38

Normative

Question 39

A ban on smoking will lower the healthcare budget is a ____ statement

Answer 39

Positive

Question 40

How do economist try to disentangle cause & effect?

Answer 40

Use economic models & natural​ experiments, statistical​ investigations, and perform economic experiments to test predictions of those models