Module 1 - Fundamentals

Question 1

___ examines individuals and markets on a small-scale level on topics such as scarcity, choices, production, and competition; specialization, shaping markets, and adjustments due to weather and government.

Answer 1

Microeconomics

Question 2

___ examine a whole economy on a large-scale level on topics such as total output, price level and production; trends and consequences of choices.

Answer 2

Macroeconomics

Question 3

A ___ is any item that is used to produce goods and services.

Answer 3

Resource

Question 4

___ are all natural resources; “gifts of nature”

Answer 4

Land

Question 5

___ is all physical and mental activity devoted to producing goods and services.

Answer 5

Labor

Question 6

___ are the tools, machinery, infrastructure, and knowledge used to produce goods and services.

Answer 6

Capital

Capital is not only money!

Question 7

Aggregate = ___

Answer 7

Total

Macroeconomics

Question 8

___ are tangible items which are created to increase productivity.
I.e., buildings, tools, machinery, etc.

Answer 8

Physical capital

Question 9

___ is the knowledge and skills people acquire in order to increase productivity.

Answer 9

Human capital

Question 10

___ is the talent or ability to combine land, labor, and capital to produce goods and services; it involves assuming risk and organizing resources into a productive process.

Answer 10

Entrepreneurial ability

Question 11

___ is a condition that results from the inability of limited resources to supply unlimited wants.

Answer 11

Scarcity

Question 12

___ is the comparison of the scarcity of one good, service or resource to that of another.
I.e., drinking water vs water in general

Answer 12

Relative scarcity

Question 13

___ is the process of assigning a good, service or resource to one use instead of another.

Answer 13

Allocation

Question 14

___ are the value or “cost” of the opportunity that was given up when another opportunity was chosen over another; these “costs” exist due to scarcity.

Answer 14

Opportunity costs

Question 15

___ is the idea that people chose to do things that interest them; not necessarily selfish.

Answer 15

Self-interest

Question 16

___ is the additional benefit associated with one or more unit of activity.
I.e., upgrading your Wendy’s meal for $1

Answer 16

Marginal benefit

Question 17

___ is the additional cost associated with one or more unit of activity.
I.e., upgrading your Wendy’s meal for $1

Answer 17

Marginal cost

Question 18

___ is the process of making choices in increments by evaluating the additional, or marginal, benefit against the additional, or marginal, cost of an action.
I.e., 1 more hour of sleep vs 1 more hour of studying

Answer 18

Marginal decision making

Question 19

___ is the idea that people make choices in order to maximize overall benefit, or utility, of an action subject to its cost.
I.e., MB ≥ MC or MB < MC

Answer 19

Optimization
MB ≥ MC (DO IT)
MB < MC (DO NOT DO IT)

Question 20

___ is when decisions are made based on (1) self-interest of the chooser, (2) marginal analysis, and overall pattern of choices which (3) optimize the overall well-being of the chooser.

Answer 20

Rational decision making

Question 21

___ is the negative relationship between the MB associated with the use of a good or service and the quantity used.
I.e., study vs sleep

Answer 21

Decreasing MB

↑ activity ↓ MB ↑MC

Question 22

___ is the positive relationship between the MB associated with the use of a good or service and the quantity used.
I.e., study vs sleep

Answer 22

Increasing MB

↓ activity ↑ MB ↓ MC

Question 23

___ is the MB of the last unit produced and consumed; the intersection point of an Optimal Output Graph where MB and MC overlap; MB = MC.

Answer 23

Optimal Level of Output

Occurs when the marginal cost of the last unit produced is equal to the market price

Question 24

___ is a table that shows the possible combinations of two different goods and services that can be produced with fixed resources and technology; max amount of good or service that can be produced based upon the alternative.

Answer 24

Production Possibilities Schedule

Question 25

___ is a graph that shows the possible combination of two different goods or services that can be produced with fixed resources and technology; shows the production combinations that are both attainable and efficient.

Answer 25

Production Possibilities Frontier (PPF)

Question 26

___ are characteristics of production whereby the opportunity cost associated with increasing the production of one good or service in terms of another, is constant at every level of production.

Answer 26

Constant opportunity costs

Question 27

___ is when allocation of resources occurs in such a way that it is possible to increase the production of one good without decreasing the production of another.

Answer 27

Efficient allocation of resources

Question 28

___ is when allocation of resources occurs in such a way that it is not possible to increase the production of one good without decreasing the production of another.

Answer 28

Inefficient allocation of resources

Question 29

___ are characteristic of production whereby the opportunity cost associated with increasing or decreasing the production of one good or service, in terms of another, is constant at every level of production.

Answer 29

Constant opportunity costs

Question 30

___ is the ability to produce a good or service at a lower relative opportunity cost than that of another producer; important in the foundation of the benefits of trade.

Answer 30

Comparative advantage

Question 31

___ is the practice of producing a single good or service rather than producing multiple goods or services.

Answer 31

Specialization

Question 32

___ is the price of one good, service or resource in terms of another.

Answer 32

Terms of trade

Seller’s opportunity cost < price < buyer’s opportunity cost

Question 33

___ is the benefit, or wealth, that accrues to a buyer or a seller as a result of trading one good, service, or resource for another; the wealth, or additional well-being, created by trade (does not need to be monetary).

Answer 33

Gains from trade

Question 34

___ is a principle that states: because some resources are better suited to produce one good or service than another, as the production of a good or service increases, the opportunity cost of each additional unit rises.

Answer 34

Law of increasing opportunity cost

Question 35

What does a PPF line look like when two goods or services are identical in units?

Answer 35

Straight line

Question 36

What does a PPF line look like when the resources being used are different in some way and opportunity cost aren’t constant?

Answer 36

Bowed out line

Question 37

The ___ is a model that concisely describes how goods, services, resources and money flow back and forth in an economy.

Answer 37

Circular flow model

Question 38

___ is a business - an entity which purchases inputs and turns them into inputs for other businesses, or outputs, to sell to consumers.

Answer 38

Firm

Question 39

___ also called “inputs” - they are transformed into outputs - and “factors of production”

Answer 39

Resources = Inputs = Factors of production

Question 40

___ only obtain income by selling resources to buy things they want to consume.

Answer 40

Households

Question 41

___ only gain revenue by buying resources to produce the output to sell.

Answer 41

Firms