Chapter 1

Question 1

The fact that there are not enough resources available to satisfy all our desires

Answer 1

scarcity

Question 2

what are the 3 core choices that every nation is confronted with?

Answer 2

• What to produce with our limited resources
• How to produce the goods and services we select
• For Whom goods and services are produced- that is, who should get them

Question 3

the resources used to produce goods and services

Answer 3

factors of production

Question 4

what are the 4 basic factors of production?

Answer 4

• Land
• Labor
• Capital
• Entrepreneurship

Question 5

What is land?

Answer 5

• Refers to all natural resources
• Oil, water, air and minerals
• Ex the land seton hill sits on

Question 6

what is labor?

Answer 6

• Skills and ability to produce goods, not just bodies
• Both quality and quantity
• Ex employees, professors, workers with the correct skill set

Question 7

what is capital?

Answer 7

• Refers to final goods produced for use in further production
• Money, funds and start up
• Ex have the financial resources to start the project
• Ex: fishing nets to catch fish in order to later sell the fish

Question 8

what is entrepreneurship?

Answer 8

• It’s not a matter of what resources you have, it’s also about how you use them
• The entrepreneur is the person who sees the opportunity for new or better products and brings together the resources needed for producing them
• The initial idea to get started

Question 9

the study of how people use scarce resources

Answer 9

economics

Question 10

what is given up to get something else

Answer 10

opportunity cost

Question 11

must sacrifice civilian goods and services in order to produce more national security

Answer 11

guns vs butter dilemma

Question 12

the alternative combinations of final goods and services that could be produced in a given time period with all available resources and technology

Answer 12

production possibilities

Question 13

shows different ways that resources can be used efficiently and shows different outputs

Answer 13

production possibilities curve

Question 14

what two principles does the production possibility curve illustrate?

Answer 14

scarce resources and opportunity cost

Question 15

there is a limit to the amount of output that can be produced within a given time period

Answer 15

scarce resources

Question 16

you can obtain more of one good by sacrificing the production of another good

Answer 16

opportunity cost

Question 17

what percent of us output is devoted to the military

Answer 17

4%

Question 18

maximum output of a good from the resources used in production

Answer 18

efficiency

Question 19

What points on the production possibilities curve are efficient?

Answer 19

every point on the curve is efficient

Question 20

when a piece of the production process is not performing at its maximum level resulting in less production

Answer 20

inefficiency

Question 21

an increase in output (real GDP); an expansion of production possibilities

Answer 21

economic growth

Question 22

The use of market prices and sales to signal desired outputs

Answer 22

market mechanism

Question 23

The doctrine of “leave it alone” of non-intervention by government in the market mechanism

Answer 23

laissez-faire

Question 24

argued that the government not only had to intervene but had to own all means of production

Answer 24

Karl Marx

Question 25

met in the middle saying that governments should play an active but not all-inclusive role in managing the economy

Answer 25

John Maynard Keynes

Question 26

An economy that uses both market signals and government directives to allocate goods and resources

Answer 26

mixed economy

Question 27

An imperfection in the market mechanism that prevents optimal outcomes

Answer 27

market failure

Question 28

Government intervention that fails to improve economic outcomes

Answer 28

government failure

Question 29

Incorporates subjective judgments about what ought to be done

Answer 29

normative analysis

Question 30

focuses on how things might be done without subjective judgments of what is best

Answer 30

positive analysis

Question 31

the study of aggregate economic behavior of the economy as a whole

Answer 31

macroeconomics

Question 32

the study of individual behavior in the economy of the components of the larger economy

Answer 32

microeconomics

Question 33

the assumption of nothing else changing

Answer 33

ceteris paribus

Question 34

during WWII what percent output was devoted to the military?

Answer 34

40%

Question 35

what is the unemployment threshold?

Answer 35

4%

Question 36

who believed the price signals and responses of the marketplace were likely to do a better job of allocating resources than any government could?

Answer 36

Adam Smith

Question 37

final goods produced for use in the production of other goods such as equipment and structures

Answer 37

capital

Question 38

the assembling of resources to produce new or improved products and technologies

Answer 38

Entrepreneurship