Vocab Quiz 1

Question 1

Economics

Answer 1

The study of scarcity and choice

Question 2

Individual Choice

Answer 2

decisions by individuals about what to do, which necessarily involve decisions about what not to do.

Question 3

Economy

Answer 3

a system for coordinating a society’s productive and consumptive activities

Question 4

Market Economy

Answer 4

an economy in which the decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in the decisions.

Question 5

Command Economy

Answer 5

an economy in which industry is publicly owned and a central authority makes production and consumption decisions.

Question 6

Incentives

Answer 6

rewards or punishments that motivate particular choices.

Question 7

Property rights

Answer 7

establish ownership and grant individuals the right to trade goods and services with each other

Question 8

Marginal analysis

Answer 8

the study of the costs and benefits of doing alittle bit more of an activity versus a little bit less.

Question 9

Resource

Answer 9

anything that can be used to produce something else.

Question 10

Land

Answer 10

all resources that come from nature, such as minerals, timber, and petroleum.

Question 11

Labor

Answer 11

The efforts of workers

Question 12

Capital

Answer 12

manufactured goods used to make other goods and services; also called “physical capital.”

Question 13

Entrepreneurship

Answer 13

the efforts of entrepreneurs in organizing resources for production, taking risks to create new enterprises, and innovating to develop new products and production processes.

Question 14

Scarce

Answer 14

in short supply; when a resource is not available in sufficient quantities to satisfy all the various ways a society wants to use it

Question 15

Opportunity cost

Answer 15

the real cost of an item: the value of the next best alternative that you must give up in order to get that item

Question 16

Microeconomics

Answer 16

the branch of economics that studies how individuals, households, and firms make decisions and how those decisions interact.

Question 17

Macroeconomics

Answer 17

the branch of economics that is concerned with the overall ups and downs of the economy.

Question 18

Economic aggregates

Answer 18

economic measures that summarize data across many different markets.

Question 19

Positive economics

Answer 19

the branch of economic analysis that describes the way the economy actually works.

Question 20

Normative economics

Answer 20

the branch of economic analysis that makes prescriptions about the way the economy should work.

Question 21

Trade-off

Answer 21

when you give up something in order to have something else

Question 22

Production Possibilities Curve (PPC)

Answer 22

illustrates the trade-offs facing an economy that produces only two goods; shows the maximum quantity of one good that can be produced for each possible quantity of the other good produced

Question 23

Efficient

Answer 23

describes a market or economy in which there is no way to make anyone better off without making at least one person worse off.

Question 24

Productive efficiency

Answer 24

achieved by an economy if it produces at a point on its production possibilities curve.

Question 25

Allocative efficiency

Answer 25

achieved by an economy if it produces at the point along its production possibilities curve that makes consumers as well off as possible.

Question 26

Technology

Answer 26

the technical means for producing goods and services

Question 27

Trade

Answer 27

when, in a market economy, individuals provide goods and services to others and receive goods and services in return.

Question 28

Gains from trade

Answer 28

an economic principle that states that people can get more of what they want through trade than they could if they tried to be self-sufficient; this increase in output is due to specialization.

Question 29

Specialization

Answer 29

situation in which each person specializes in the task that he or she is good at performing

Question 30

Comparative advantage

Answer 30

the advantage conferred by an individual if the opportunity cost of producing the good or service is lower for that individual than for other people

Question 31

Absolute advantage

Answer 31

the advantage conferred by the ability to produce more of a good or service with a given amount of time and resources; different from comparative advantage

Question 32

Terms of trade

Answer 32

indicate the rate at which one good can be exchanged for another.