Unit 1

Question 1

want

Answer 1

a thing we desire to have

Question 2

resource

Answer 2

anything that is used to produce goods or services

Question 3

scarcity

Answer 3

the condition in which our wants are greater than the resources available to satisfy those wants

Question 4

opportunity cost

Answer 4

the most highly valued opportunity or alternative forfeited when a choice is made

Question 5

trade-off

Answer 5

a situation in which more of one thing necessarily means less of something else

Question 6

production possibilities frontier

Answer 6

a graphic representation of all possible combinations of two goods that an economy can produce

Question 7

rationing device

Answer 7

a means for deciding who gets what portion of the available resources and good

Question 8

economics

Answer 8

the science that studies the choices of people trying to satisfy their wants in a world of scarcity

Question 9

marginal

Answer 9

additional

Question 10

incentive

Answer 10

something that encourages or motivates a person to take action

Question 11

microeconomics

Answer 11

deals with human behavior and choices as they relate to relatively small units

Question 12

macroeconomics

Answer 12

deals with human behavior and how it relates to the entire economy

Question 13

theory

Answer 13

an explanation of how something works, designed to answer a question for which there is no obvious answer

Question 14

good

Answer 14

anything that satisfies a person’s wants or brings them satisfaction

Question 15

utility

Answer 15

the quality of bringing satisfaction or happiness

Question 16

disutility

Answer 16

the opposite of utility

Question 17

services

Answer 17

tasks that people pay others to perform for them

Question 18

land

Answer 18

all the natural resources found in nature

Question 19

labor

Answer 19

the physical and mental talents that people contribute to the production of goods and services

Question 20

capital

Answer 20

produced goods that can be produced as resources for further production

Question 21

entrepreneurship

Answer 21

the special talent that some people have for searching out and taking advantage of new business opportunities

Question 22

economic system

Answer 22

the way in which a society decides what goods to produce, how to, and for whom the goods will be produced

Question 23

free enterprise

Answer 23

a system in which most individuals own most, if not all, the resources and control the use

Question 24

socialism

Answer 24

a system in which government controls and may own many of the resources

Question 25

economic plan

Answer 25

a government program specifying economic activities such as what goods are to be produced and what prices will be charged

Question 26

income distribution

Answer 26

the way all income earned in a country is divided among different groups of income earners

Question 27

mixed economy

Answer 27

an economy that is neither purely capitalist nor socialist

Question 28

traditional economy

Answer 28

an economy in which the answers to the three economic questions are based on cultures, religion, and customs

Question 29

vision

Answer 29

a sense of how the world works

Question 30

labor theory of value

Answer 30

the belief that all value in produced goods is derived from labor

Question 31

surplus value

Answer 31

the difference between the total value of production and the subsistence wages paid to workers

Question 32

globalization

Answer 32

economic agents in any given part of the world are affected by events elsewhere in the world

Question 33

offshoring

Answer 33

the term used to describe work done for a company by persons other than the original company’s employees in a country other than the one in which the company is located

Question 34

private property

Answer 34

any good that is owned by a individual or a business

Question 35

public property

Answer 35

any good that is owned by the government

Question 36

household

Answer 36

an economic unit of one person or more that sells resources and buy goods and services

Question 37

circular flow of economic activity

Answer 37

the economic relationships that exists between different economic groups in an economy

Question 38

profit

Answer 38

the amount of money left over after all the cost of production have been paid

Question 39

loss

Answer 39

the amount of money by which total cost exceeds total revenue

Question 40

ethics

Answer 40

the principles of conduct, such as right and wrong, morality and immorality, good and bad

Question 41

contract

Answer 41

an agreement between two or more people

Question 42

private good

Answer 42

a good of which one person’s consumption takes away from another person’s contribution

Question 43

public good

Answer 43

a good of which one person’s consumption does not take away from another one’s consumption

Question 44

excludable public good

Answer 44

a public good that individuals can be excluded from consuming

Question 45

nonexcludable public good

Answer 45

a public good that individuals can NOT be excluded from consuming

Question 46

free rider

Answer 46

a person who receives the benefits of a good without paying for it

Question 47

negative externality

Answer 47

an adverse side effect of an act that is left by others

Question 48

positive externality

Answer 48

a beneficial side effect of an action that is felt by others