Chapter 1: Introducing the Economic Way of Thinking; Chapter 2: Production Possibilities, Opportunity Cost, and Economic Growth

Question 1

The condition in which human wants are forever greater than the available supply of time, goods, and resources. What is this?

Answer 1

Scarcity

Question 2

What are resources (also called factors of production)?

Answer 2

Inputs used to produce goods and services

Question 3

What are the 3 factors of production?

Answer 3

Land (natural resources), labor (human capital, entrepreneurship), and capital (constructed inputs such as factories, equipment, machinery, physical plants)

Question 4

The money value of paper assets, such as stocks, bonds, or a deed to a house. What are these?

Answer 4

Financial capital

Question 5

Is money capital?

Answer 5

No, but it can be used to purchase land, labor, or capital (all factors of production)

Question 6

How society chooses to allocate its scarce resources to the production of goods and services. What is being described?

Answer 6

The definition of economics

Question 7

What is the difference between macroeconomics and microeconomics?

Answer 7

Macroeconomics that studies decision making for the economy as a WHOLE; microeconomics studies decision making by a single INDIVIDUAL

Question 8

A ___________ can be stated as a verbal argument, numerical table, graph, or mathematical equation. It is to forecast or predict.

Answer 8

Model

Question 9

What are 3 steps economists use to solve a problem?

Answer 9

1. Identify the problem; 2. Develop a model based on simplified assumptions; 3. Collect data, test the model, and formulate a conclusion

Question 10

What Latin phrase is used when making a model, meaning that while certain variables change, “all other things remain unchanged”?

Answer 10

Ceteris paribus

Question 11

What type of relationship validates an economic model?

Answer 11

Cause-and-effect relationship

Question 12

Are correlations dependable over time?

Answer 12

No, they occur by chance and eventually disappear (i.e., The market crashes on the 2nd game of the World Series)

Question 13

What type of economics addresses verifiable questions, ones that can be proven true or false?

Answer 13

Positive economics

Question 14

What type of economics attempts to determine “what should be” and is subjective analysis based on value judgments?

Answer 14

Normative economics

Question 15

Is scarcity and ever present and universal condition?

Answer 15

Yes

Question 16

With economic graphs a ________ relationship occurs when two variables change in the same direction.

Answer 16

Direct

Question 17

An ___________ relationship occurs when two variables are unrelated.

Answer 17

Independent

Question 18

What is a person who combines the factors of production to produce innovative products?

Answer 18

An entrepreneur

Question 19

Are renewable and nonrenewable natural resources an example of land resource?

Answer 19

Yes

Question 20

What type of economics is represented by this statement? “If policy A is followed, then outcome B results”

Answer 20

Positive economics

Question 21

Is there anything that can fully eliminate scarcity as an economic problem

Answer 21

Nothing realistically

Question 22

True or false: Financial capital by itself is not productive; instead it is only a paper claim on economic capital

Answer 22

True

Question 23

What are the three fundamental economic questions?

Answer 23

What to produce, how to produce, and for whom to produce

Question 24

The best alternative sacrificed for a chosen alternative. What is this describing?

Answer 24

Opportunity cost

Question 25

Marginal analysis means evaluating ________ changes from a current situation

Answer 25

Positive or negative

Question 26

A _____________ shows the maximum combinations of two outputs that an economy can produce

Answer 26

Production possibilities curve (PPC)

Question 27

What are the 3 basic assumptions of the PPC?

Answer 27

1.Fixed resources (an economy shifts any resource from the production of one output to the production of another output)
2. Fully employed resources (fully employed workforce and producing the greatest output possible without waste or management
3. Technology unchanged

Question 28

What are the 3 basic assumptions of the PPC?

Answer 28

Fixed resources (an economy shifts any resource from the production of one output to the production of another output); fully employed resources; technology remains unchanged

Question 29

What is another way of saying maximum output levels?

Answer 29

Efficient points

Question 30

The opportunity cost increases as production of one output expands; what is being described?

Answer 30

The law of increasing opportunity costs

Question 31

What causes increasing opportunity costs and the bowed-out shape of the PPC?

Answer 31

The lack of interchangeability between workers

Question 32

What are two factors in an economy’s production capacity increasing and experiencing economic growth? (The PPC would shift outward)

Answer 32

The resource base increases (like more natural resources, a baby boom, or more factories), or technology advances

Question 33

What will cause the PPC to shift inward?

Answer 33

A reduction in resources (factors of production)