The Economic Problem (Scarcity & Choice) Flashcards
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Q: What is microeconomics the study of?
A: How to solve the basic economic problem: how to give out scarce resources given unlimited wants.
Q: What is the basic economic problem?
A: The world has unlimited wants but limited resources, creating a scarcity issue.
Q: What are resources in economics known as?
A: Resources are called factors of production: Capital, Enterprise, Land, and Labor (CELL).
Q: What is capital in economics?
A: Capital refers to man-made aids to production, like machinery, factories, and computers.
Q: What is enterprise in economics?
A: Entrepreneurs take risks and create to produce goods and services, aiming for profit.
Q: What does land refer to in economics?
A: Land refers to natural resources like farmland, forests, and other natural assets.
Q: What is labor in economics?
A: Labor refers to human resources—workers who produce goods and services.
Q: Why are resources considered scarce?
A: The world does not provide an infinite amount of resources, creating scarcity.
Q: What are the three fundamental economic choices due to scarcity?
A: What to produce, how to produce, and for whom to produce.
Q: In a market economy, how is the decision of what to produce made?
A: Businesses decide what to produce based on consumer demand.
Q: How is the decision of how to produce made in a market economy?
A: Businesses aim to produce goods in the most cost-effective way, minimizing the use of scarce resources.
Q: Who decides for whom to produce in a market economy?
A: In a market economy, those who can afford goods and services get them, although governments can intervene.
Q: What is opportunity cost?
Opportunity cost is what you give up when choosing one option over another. For example, if you pick one choice, the opportunity cost is the value of the next best option you didn’t choose.
Q: How does opportunity cost help measure the quality of decisions?
A: If the value of the opportunity cost is greater than the current choice, a bad decision was made.
Q: What makes a good economic decision according to opportunity cost?
A: A good decision is when the value of the current choice exceeds the value of the opportunity cost.
