Section 1: Basic Economic Concepts

Question 1

Ceteris Paribus

Answer 1

means “other things equal” and is assumed in order to make generalizations

Question 2

Scarcity

Answer 2

the demand for a good or service is greater than the availability of the good or service

Question 3

Factors of Production

Answer 3

Land, Labor, Capital, Entrepreneurship

Question 4

Definition of Macroeconomics

Answer 4

the study of the economy as a whole
or in aggregates such as all households or all businesses

Question 5

Definition of Microeconomics

Answer 5

looks at specific economic units
A household or a business

Question 6

Marginal Benefit

Answer 6

how much extra benefit for the choice

Question 7

Marginal Cost

Answer 7

how much extra cost comes from the choice

Question 8

Comparative Advantage

Answer 8

One country can produce a good at a lower opportunity cost than another country

Question 9

Absolute Advantage

Answer 9

One country can produce more of a good than another country
(Not just about cost)

Question 10

Terms of Trade

Answer 10

the trading price agreed upon by two trade partners that will be mutually beneficial

Question 11

Specialization

Answer 11

should specialize based on having a lower opportunity cost

Question 12

Positive Economics

Answer 12

focuses on facts and cause-and-effect relationships.

Question 13

Normative Economics

Answer 13

incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal

Question 14

Economics

Answer 14

the study of the efficient use of scarce resources to achieve the maximum satisfaction of economic wants

Question 15

Opportunity Cost

Answer 15

the value of a choice,relative to their alternative.

Question 16

Theoretical Economics

Answer 16

the process of deriving theories and principles

Question 17

Economic Policy

Answer 17

When societies apply economic generalizations to solving problems

Question 18

Command Economy

Answer 18

The government controls the factors of production

Question 19

Market Economy

Answer 19

individuals and businesses control the factors of production

Question 20

Mixed Economy

Answer 20

Some factors of production are controlled by the government, others by individuals

Question 21

Adam Smith, The Wealth of Nations, and the Invisible Hand

Question 22

Business Cycles

Answer 22

the alternating rises and declines in the economy

Question 23

Inflation

Answer 23

a rise in the overall level of prices

Question 24

Deflation

Answer 24

fall in overall price level

Question 25

Price Stability

Answer 25

Prices increase slowly

Question 26

Trade-Offs

Answer 26

When you give up something to have something else

Question 27

Production possibilities curve (PPC)

Answer 27

a model that measures opportunity costs

Question 28

Goods for the present

Answer 28

consumer goods

Question 29

Goods for the future

Answer 29

capital goods, research & education and preventative medicine.

Question 30

Specialization

Answer 30

Countries should specialize in and only produce goods in which they have a comparative advantage.

Question 31

Capital

Answer 31

the assets that allow for increased work productivity

Question 32

Entrepreneur

Answer 32

Business leaders that combine other factors of production to develop solutions to economic needs

Question 33

production-possibilities curve indicates

Answer 33

the opportunity cost

Question 34

Physical Capital

Answer 34

any human made resource that is used to create other goods and services

Question 35

Human Capital

Answer 35

Any skills or knowledge gained by a worker through education and experience