Chapter 1: What is Economics?

Question 1

need

Answer 1

something necessary for survival; i.e. air, food, shelter, etc.

Question 2

want

Answer 2

an item we desire but that is not essential to survival

Question 3

economics

Answer 3

the study of how people seek to satisfy their needs and wants by making choices

Question 4

scarcity

Answer 4

limited quantities of resources to meet unlimited wants

Question 5

goods

Answer 5

physical objects such as clothes or shoes

Question 6

services

Answer 6

actions or activities that one person preforms for another

Question 7

shortage

Answer 7

a situation in which a good or service is unavailable

Question 8

land

Answer 8

all natural resources used to make goods & services

Question 9

labor

Answer 9

effort that people devote to a task for which they are paid

Question 10

capital

Answer 10

any human-made resource that is used to create other goods and services; two kinds: physical and human

Question 11

physical capital

Answer 11

all human-made goods that are used to produce other goods and services; tools and buildings

Question 12

human capital

Answer 12

the skills and knowledge gained by a worker through education and experience

Question 13

entrepreneur

Answer 13

ambition leader who combines land, labor, and capital to create and market new goods and services

Question 14

trade-off

Answer 14

an alternative that we sacrifice when we make a decision

Question 15

guns or butter

Answer 15

a phrase that refers to the trade-offs that nations face when choosing whether to produce more or less military or consumer goods

Question 16

opportunity cost

Answer 16

the most desirable alternative given up as the result of a decision

Question 17

thinking at the margin

Answer 17

deciding whether to do or use one additional unit of some resource

Question 18

production possibilities curve

Answer 18

a graph that shows alternative ways to use an economy’s resources

Question 19

production possibilities frontier

Answer 19

the line on a production possibilities graph that shows the maximum possible output

Question 20

efficiency

Answer 20

using resources in such a way as to maximize the production of goods and services

Question 21

underutilization

Answer 21

using fewer resources than an economy is capable of using

Question 22

cost

Answer 22

to an economist, the alternative that is given up because of a decision

Question 23

law of increasing costs

Answer 23

law that states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases

Question 24

economics

Answer 24

What begins with the idea that not everyone can have what they need and want?

Question 25

scarcity

Answer 25

Economics is about solving the problem of…

Question 26

because our needs and wants are greater than our resource supply

Answer 26

Why will scarcity always exist?

Question 27

factors of production

Answer 27

land, labor, and capital; the three groups of resources that are used to make all goods and services

Question 28

land, labor, and capital

Answer 28

What are the three factors of production?

Question 29

because land, labor, and capital are scarce

Answer 29

Why are goods and services scarce?

Question 30

its technological level and the resources it has available

Answer 30

A country’s production possibilities depend on what two things?

Question 31

a graph

Answer 31

What shows alternative ways to use an economy’s resources?

Question 32

efficiency, growth, cost

Answer 32

A production possibilities graph can show what three things?