Test 1 Flashcards
1
Q
Guns and Butter
A
- Fundamental tradeoff between consumer and military goods.
2
Q
Opportunity Cost
A
- Best alternative/ Second choice
3
Q
Purpose of Production Possibilities Graph
A
- To demonstrate tradeoffs
4
Q
What causes the PPF to grow
A
- More resources
- More technology
5
Q
Underutilization
A
- Not all resources used
6
Q
Scarcity
A
- Limited quantities of resources to meet unlimited needs or desires
7
Q
Shortage
A
- Producers will not or can not offer goods or services at current prices
8
Q
Basic Principle of Free Enterprise system (7)
A
- Voluntary exchange
- Free contract
- Legal equity
- Open opportunity
- Competition
- Private property
- Profit motive
9
Q
Why are private property rights important in a free enterprise system
A
- Essential for economic growth and development
10
Q
Factors of production
A
- Land
- Labor
- Capital
11
Q
Human Capital
A
- Skills and knowledge gained by a worker
12
Q
Physical Capital
A
- Human made resources used to create goods and services
13
Q
Entrepreneur
A
- People who take the risk of starting a business/ people who bring together land, labor, and capital to start a new business
14
Q
Efficiency
A
- using all resources
15
Q
Thinking at the margin
A
- deciding to do more or less of something
16
Q
Externality
A
- an economic side effect
17
Q
GDP (gross domestic product)
A
- value of all goods and services produced
18
Q
Business Cycle
A
- Period of growth/ expansion, followed by contraction
19
Q
Invisible hand theory
A
- The idea that markets regulate themselves
20
Q
Self- Interest
A
- Motivates businesses to start
21
Q
Competition
A
- Forces businesses to have low prices and good products
22
Q
Three main goals of government
A
- High employment
- Steady growth
- Steady prices
23
Q
Poverty threshold
A
- Minimum income needed to support your family
