Chapter 1-Ten Principles Of Economics

Question 1

Economics

Answer 1

The study of how society manages its scarce resources.

Question 2

Firm

Answer 2

Group of people grouped together to produce goods/services

Question 3

Max profit

Answer 3

Revenue-costs

Question 4

Revenue

Answer 4

What you earn from something

Question 5

Efficiency

Answer 5

Society achieved max benefits from its scarce resources (max total production/total income)

Question 6

Equity

Answer 6

Economic benefits are distributed uniformly (how income is distributed)

Question 7

Opportunity cost

Answer 7

What you give up to get an item

Question 8

Explicit cost

Answer 8

Monetary cost (ex. Firm pays employee/person pays for coffee)

Question 9

Implicit cost

Answer 9

Something you give up but do not explicitly pay for (ex. give up sleep to go to school)

Question 10

Scarcity

Answer 10

The limited nature of society’s resources

Question 10

Incentive

Answer 10

Something that induces people to act

Question 10

Inflation

Answer 10

An increase in the overall level of prices in the economy

Question 11

Production possibility frontier

Answer 11

A graph that shows combinations of two goods that can be produced with available factors of production and existing technology

Question 12

Production is Efficient

Answer 12

• resources are fully employed

- producing more of one good requires you to give up some of the other good

Question 13

Total benefit

Answer 13

Revenue generated by all customers for all advertising hours

Question 14

Total cost

Answer 14

Total amount spent for all hours of advertising

Question 15

Net benefit

Answer 15

Total benefit minus total cost

Question 16

Marginal benefit

Answer 16

Revenue generated by the additional customers gained from the last hour of advertising

Question 17

Marginal cost

Answer 17

Cost of the last hour of advertising

Question 18

Comparative Advantage

Answer 18

The ability to produce a good at a lower opportunity cost than another producer

Question 19

Absolute advantage

Answer 19

The ability to produce a good using fewer inputs than another producer

Question 20

Competitive market

Answer 20

• many buyers/sellers so each has a negligible impact on market price
• the good being sold is standardized
• buyer/seller aware of the prices others are paying/charging

Question 21

Normal good

Answer 21

If I come rides then demand rises

Question 22

Inferior good

Answer 22

If I come rises then demand falls

Question 23

Law of supply

Answer 23

An increase in price of good will cause an increase in quantity supplied

Question 24

Quantity supplied

Answer 24

The amount sellers are willing and able to sell

Question 25

Law of demand

Answer 25

An increase in price of a good will cause a decrease in quantity demanded of good

Question 26

Quantity demanded

Answer 26

The amount buyers are willing and able to purchase