Econ unit 1 test

Question 1

Economics

Answer 1

the study of how people choose to use their limited resources to satisfy their un- limited wants

Question 2

economy

Answer 2

a system used to manage limited re- sources for the production, distribution, and consumption of goods and services

Question 3

positive economics

Answer 3

The branch of economics that uses objective analysis to find out how the world works. The goal is to describe how things are.

Question 4

normative economics

Answer 4

The branch of economics that applies value judgments to data in order to recommend actions or policies. The goal is to advise how things ought to be done.

Question 5

scarcity

Answer 5

the condition that results because people have limited resources but unlimited wants

Question 6

tradeoff

Answer 6

the exchange of one benefit or advantage for another that is thought to be better

Question 7

cost-benifit analysis

Answer 7

a way to compare the costs of an action with the benefits of that action. if benefits exceed costs, then the action is worth taking.

Question 8

incentive

Answer 8

Any factor that encourages or motivates a person to do something. Prices, taxes, and laws create incentives that influence how people behave.

Question 9

Economic Enigma

Answer 9

puzzles or riddles that might be explained through an economic analysis

Question 10

Resources

Answer 10

anything used to produce an economic good or a service

Question 11

microeconomics

Answer 11

the study of economics at an individual, group, or company level.

Question 12

Macroeconomics

Answer 12

the study of a national economy as a whole.

Question 13

costs

Answer 13

what you spend in money, time, effort, or other sacrifices to get it

Question 14

Benefits

Answer 14

what you gain from something in terms of money, time, experience, or other improvements in your situation

Question 15

margin

Answer 15

the outer edge of something

Question 16

marginal cost

Answer 16

an increase in total costs when you add one unit to something

Question 17

marginal benefit

Answer 17

what you gain by adding one more unit to something

Question 18

market

Answer 18

any arrangement that brings buyers and sellers together to do business with each other

Question 19

graph

Answer 19

a visual representation of the relationship between two given sets of data

Question 20

variable

Answer 20

quantity that can vary, or change

Question 21

economic model

Answer 21

a simplified representation of reality that often allows economists to focus on the effects of one change at a time

Question 22

who was Adam smith? what did he write? what did he say?

Answer 22

he is a political economist and philosopher. he wrote the book “wealth of nations”. he explains that there should not be any government interference in business. he describes the invisible hand that guides human affairs in order to explain this mystery. there should also be competition for best product and convenience

Question 23

what are the four ways to define economics depending on how economists view their work?

Answer 23

1. analyze everyday enigmas
2. teaching better decision making
3. study how people use limited resources to satisfy unlimited wants.
4. analyze how economics work and making policy recommendations (positive and normative economics)

Question 24

what are the seven principles of economic thinking.

Answer 24

1. scarcity forces tradeoffs: limited resources force people to make choices and face tradeoffs as a result of these choices
2. costs v benefits: choose something when the benefits of doing so are greater than the costs
3. thinking at the margin: most decisions we make each day involve choices about a little more or a little less of something rather than making a wholesale change
4. incentives matter: people respond to incentives in generally predictable way
5. trade makes people better off: by focusing on what we do well then trading with others, we will end up with more better choices than by trying to do everything for ourselves
   6: markets coordinate trade: markets usually do better than anyone or anything else at coordinating exchanges between buyers and sellers
6. future consequences count: decision made today have consequences not only for today but also in the future.

Question 25

list and explain the three tools economists use

Answer 25

1. scientific method: posing question, researching the question, developing hypothesis, conducting studies to collect information, and then evaluating the hypothesis. 2. graphs: used to simplify the complex, three dimensional world we live in 3. economic model: simplified representation of reality that often allows economists to focus on the effect of one change at a time

Question 26

Goods

Answer 26

physical articles that have been produced for sale or use. three examples are food, clothing and cars

Question 27

Services

Answer 27

work done by someone else for which a consumer, business, or government is willing to pay

Question 28

factors of production

Answer 28

the resources used to produce goods and services. economists define these resources as land, labor, and capital

Question 29

Entrepreneurship

Answer 29

the willingness and ability to take the risks involved in starting and managing a business

Question 30

Capital

Answer 30

the tools, machine, and buildings used to produce goods and services.

Question 31

opportunity cost

Answer 31

the value of the next best alternative that is given up when making a choice. this is the measure of what you must give up when you make a decision

Question 32

production possibilities frontier

Answer 32

a simple model of an economy that shows all the combinations of two goods that can be produced with the resources and technology currently available

Question 33

inputs

Answer 33

the scarce resources that go into the production process

Question 34

outputs

Answer 34

the goods and services produced using these resources

Question 35

perpetual resources

Answer 35

resources that are widely available and in no danger of being used up

Question 36

renewable resources

Answer 36

resources that can be replenished as they are used

Question 37

nonrenewable resources

Answer 37

resources that once they're used, they are gone forever.

Question 38

financial capital

Answer 38

money used to buy the tools and equipment used in production

Question 39

Utility

Answer 39

satisfaction or pleasure one gain from consuming a product or service or from taking an action.

Question 40

Marginal Utility

Answer 40

the extra satisfaction or pleasure you will get from an increase of one additional unity of a good or service.

Question 41

Negative Utility

Answer 41

a lack of pleasure or satisfaction from consuming a product or service or taking an action; the opposite of utility

Question 42

describe the three reasons why we want is scarce?

Answer 42

1. our wants always exceed our resources. 2. with resources limited, scarcity is everywhere 3. shortages are temporary, while scarcity is forever

Question 43

explain the four factors of production

Answer 43

1. land: the gift of nature 2. labor: putting human capital to work 3. capital: tools, machines, buildings, and money 4. entrepreneurship: a person who is innovator, strategist, risk taker, and a spark plug

Question 44

name and define the three types of resources.

Answer 44

1. perpetual resources: widely available and in no danger of running out 2. renewable resources: can be replenished as they are used 3. nonrenewable resources: once they're used, they are gone forever

Question 45

name and define the three types of capital.

Answer 45

1. financial capital: money used in business 2. physical capital/capital goods: concrete productive resources 3. human capital: the knowledge and skill people gain from education, job training, and experiences

Question 46

explain the relationship between maximizing utility, tradeoffs, and opportunity cost.

Answer 46

maximizing utility is the satisfaction one gain from consuming a product tradeoffs is what we give up when we choose, scarcity, (guns & butter) opportunity cost is the best thing we give up to get what we want/ second best thing (time vs money)

Question 47

what is the law of diminishing utility?

Answer 47

the more you consume of something, the less satisfaction you will get from each additional unit

Question 48

Mankiw's Ten Principles of Economics

Answer 48

1. People face trade-offs 2. The cost of something is what you give up to get it 3. Rational people think at the margin 4. People respond to incentives 5. Trade can make everyone better off 6. Markets are usually a good way to organize economic activity 7. Governments can sometimes improve market outcomes 8. A country's standard of living depends on its ability to produce goods and services 9. Prices rise when the government prints too much money 10. Society faces a short-run trade-off between inflation and unemployment