Econ Final Review chap 1-3

Question 1

Circular flow of economic activity

Answer 1

House holds and firms, goods services and consumptions

Question 2

Command economy

Answer 2

An economy where the main economic decisions are made by a government

Question 3

Incentives

Answer 3

A payment or concession to stimulate greater output or investment

Question 4

Production possibilities curve

Answer 4

A curve depicting all maximum output possibilities for two or more goods

Question 5

Opportunity cost

Answer 5

The loss of potential gain from other alternatives when one alternative is chosen

Question 6

Market economy

Answer 6

An economy in which decisions regarding investment, production, and distribution are based on supply and demand

Question 7

Invisible hand

Answer 7

A metaphor used by Adam smith to describe unintended social benefits resulting from individual actions

Question 8

Traditional economy

Answer 8

An economy where traditions, customs and beliefs shape the goods and services the economy produces

Question 9

Mixed economy

Answer 9

An economic system combining private and public enterprise

Question 10

Ceteris Paribus

Answer 10

With other conditions remaining the same