Macro Quiz 1 Flashcards
In the circular flow illustration what should go on the bottom of the arrow pointing from factors market to business?
Factors of production
Instead of using sunk cost fallacy what decision making method should you use?
Economic decision rule
In the circular flow illustration what should go on top of the arrow pointing from goods market to households?
Goods and services
Comparative Advantage
Someone who is better suited to do the production of one good than to the production of the other good
How does a market economy answer the 3 key economic questions?
The market answers these questions
What decision method should you not use in economics?
Sunk Cost Fallacy
Absolute Advantage
Who can make more with the same amount of resources
For government where should you have arrows pointing?
Have 2 sided arrows(➡️⬅️) to and from households and business
If supply and demand shift in the same direction what will be unknown?
Price
When does supply and demand shift?
When there are two effects or if you see “and”
When is there no shift on the supply and demand graph?
If only price changes
Sunk Cost
Are costs that you already had to pay and cannot be recovered
How does a traditional economy answer the 3 key economic questions?
Tradition answers all three key economic questions
What goes at the top of the circular flow diagram illustration
Goods Market
At the end of the drawing of the circular flow diagram what should you do?
Have arrows going in both directions connecting the four sectors of the economy together
In the circular flow illustration what should go on the bottom of the arrow pointing from government to households?
Services
What are the 3 key economic questions?
What to produce?
How to produce it?
Who gets what?
What are the five things included in a circular flow diagram illustration?
Government Goods Market Business Factors Market Households
What goes on the right in the circular flow diagram illustration
Business
If supply and demand shift in opposite directions what will be unknown?
Quantity
In the circular flow illustration what should go on the bottom of the arrow pointing from government to business?
Services
In the circular flow illustration what should go on top of the arrow pointing from government to households?
Tax
What goes on the bottom in the circular flow diagram illustration
Factors market
When does a shift in supply happen?
Something that affects how much people want to produce
What is the return on the factor of production for land?
Rent
When does a shift in demand occur?
Something that affects how much people want to consume it
What are the 3 factors of production?
Land
Labor
Capital
What are the 2 returns on the factor of production for capital?
Interest
Profits
How does a market economy answer the first key economic question: what to produce?
Consumers ultimately dictate
Quota
A license that the government implements which limits entry into the market
What is the return on the factor of production for labor?
Wages
What goes in the center of the circular flow diagram illustration
Government
What is an example of a quota?
Taxi driver license
In the circular flow illustration what should go on the bottom of the arrow pointing from households to goods market?
Money
In the circular flow illustration what should go on top of the arrow pointing from business to factors market?
Factor Payment
Economic decision making rule
If marginal benefit is greater than the marginal cost we should do it
What goes on the left in the circular flow diagram illustration
Households
Sunk cost fallacy
Making decisions based on sunk costs
How does a command economy answer the 3 key economic questions?
The government determines the answers to these questions
Marginal Cost
Any new cost you will have to pay if you do something knew
What are quotas also known as?
Quantity restrictions
How does a market economy answer the 3rd key economic question: Who gets what?
Pricing system
How does a market economy answer the 2nd key economic question: How to produce it?
Firms choose based on maximizing their profits
In the circular flow illustration what should go on top of the arrow pointing from government to business?
Tax
