Chapter 1- The Economic Problem

Question 1

Rational Behaviour

Answer 1

making choices by logically weighing the personal benefits and costs of available actions, then selecting the most attractive option
- not always right or ethical

Question 2

Economic Problem

Answer 2

having unlimited wants by limited resources with which to satisfy them

Question 3

Scarcity

Answer 3

limited nature of resources

Question 4

Economic Resources

Answer 4

basic items, including natural, capital and human resources, used in all types of production

Question 5

Natural Resources

Answer 5

the resources from nature, including land, raw materials, natural processes that are used in production

Question 6

Natural Resources

Answer 6

the resources from nature, including land, raw material, natural processes that are used in production
ex. land, farms, roads, buildings, raw materials- forests, naturals processes- sunlight and water power

Question 7

Capital Resources (Capital)

Answer 7

the processed materials, equipment and buildings used in production

Question 8

Labour

Answer 8

human effort employed directly in production
ex. work of a computer programmer, store clerk, factory supervisor

Question 9

Entrepreneurship

Answer 9

Initiative, risk taking, innovation necessary for production
- brings natural resources, capital resources and labour to produce a good or service
ex. Founder or start up company, brings 2gether a new product

Question 10

Microeconomics

Answer 10

branch of economics that focuses on the behaviour of individual participants in various markets

Question 11

Macroeconomics

Answer 11

the branch of economics that takes a wide-ranging view of the economy, studying the behaviour of the economic sectors
4 sectors- household, business, govt, and foreign markets

Question 12

Economic Models

Answer 12

generalization about or simplification of economic reality, aka laws, principals, or theories

Question 13

Variable

Answer 13

factors that have measurable values

Question 14

Independent Variable

Answer 14

the variable causing the other to change

Question 15

Dependant Variable

Answer 15

the variable being affected

Question 16

Inverse Relationship

Answer 16

a change in the independent variable causes a change in the opposite direction of the dependant variable
ex. price going up and then sales going down

Question 17

Direct Relationsship

Answer 17

a change in the independent variable causes a change in the same direction of the dependant variable

Question 18

Ceteris Paribus

Answer 18

the assumption that all other things remain the same

Question 19

Positive Economics (Descriptive Economics)

Answer 19

the study of economic facts and why the economy operates as it does
- based in facts, not opinions
- positive statements that can be accepted or rejected through the scientific method
ex. Canadians bought 5 million TV’s last year

Question 20

True or False

Economic models include casual relationships between variables and are not based on simplifying assumptions.

Answer 20

False. They are based on simplifying assumptions.

Question 21

True or False

Microeconomics concentrates on the ways consumers and businesses interact in various markets.

Answer 21

True

Question 22

True or False

Macroeconomics concentrates on the ways consumers and businesses interact in various markets.

Answer 22

False. Microeconomics does.

Question 23

True or False

Macroeconomics takes a broader look at the economy as a whole and highlights variables such as unemployment, inflation and total output.

Answer 23

True

Question 24

True or False

Microeconomics takes a broader look at the economy as a whole and highlights variables such as unemployment, inflation and total output.

Answer 24

False. This is macroeconomics described.

Question 25

What three resources fall under economic resources?

Answer 25

natural, capital and human.

Question 26

True or False

The basic economic problem faced by individuals is that and societies is that while the human wants are virtually unlimited, the resources to fulfill them are limited or scare.

Answer 26

True

Question 27

True or False

Economists assume that virtually all human behaviour is rational, which means that people make choices by logically weighing the benefits and costs or available actions, subject to individual wants.

Answer 27

True

Question 28

True or False

Economists assume that virtually all human behaviour is rational, which means that people make choices by illogically weighing the benefits and costs or available actions, subject to individual wants.

Answer 28

False

Question 29

True or False

Economists assume that individuals make economics choices among scarce items by maximizing their own utility while minimizing opportunity cost.

Answer 29

True

Question 30

True or False

The Production possibilities curve shows the range of choices faced by an economy. It assumes only 1 product, fixed resources and technology and full production.

Answer 30

False

2 products

Question 31

True or False

The Production possibilities curve shows the range of choices faced by an economy. It assumes only 2 products, variable resources and technology and full production.

Answer 31

False.

Fixed resources.

Question 32

True or False
The Production possibilities curve shows the range of choices faced by an economy. It assumes only 2 products, fixed resources and technology and full production.

Answer 32

True

Question 33

True or False

Points inside the production possibilities curve are possible but indicate that not all resources are being used effectively. In contrast, points outside teh curve cannot be reached unless resources increase or technology improves.

Answer 33

True

Question 34

True or False

The fact that economic resources are specialized leads to the law of increasing opportunity costs: as the economy’s production of any item is expanded, that item’s opportunity cost decreases.

Answer 34

False.

Opportunity cost increases.

Question 35

True or False

Economic growth is associated with an inward shift of the production possibilities curve, or a movement from within the area bounded by the curve itself.

Answer 35

False.

Outward shift of the production possibilities curve.

Question 36

Economic contraction occurs when the production possibilities curve shifts inward or outward? Or when the economy moves from the curve itself to within or outside of the area bounded by the curve?

Answer 36

Economic contraction occurs when the production possibilities curve shifts inward

Or when the economy moves from the curve itself to within the area bounded by the curve?