Econ 100

Question 1

Economics

Answer 1

The study of how humans make decisions in the face of scarcity. Ex: individual, family, business, and societal decisions.

Question 2

Scarcity

Answer 2

Human wants for resources that may be limited. Ex; labor, tools, land, and raw materials.

Question 3

Circular Flow Diagram

Answer 3

A diagram that views the economy as consisting of households and firms interacting in a goods and services market and a labor market.

Question 4

Command Economy

Answer 4

An economy where economic decisions are passed down

Question 5

Division of Labor

Answer 5

The way in which different workers divide required tasks to produce a good or service.

Question 6

Economies of Sale

Answer 6

When the average cost of producing each individual unit declines as total output increases.

Question 7

Exports

Answer 7

Products (goods and services) made domestically and sold abroad.

Question 8

Fiscal Policy

Answer 8

Economic policies that involve government spending and taxes.

Question 9

Globalization

Answer 9

The trend in which buying and selling in markets have increasingly crossed national borders.

Question 10

Goods and Services Market

Answer 10

A market in which firms are sellers of what they produce and households are buyers.

Question 11

Gross Domestic Product (GDP)

Answer 11

Measure of the size of total production in an economy.

Question 12

Imports

Answer 12

Products (goods and services) made abroad and then sold domestically.

Question 13

Labor Market

Answer 13

The market in which households sell their labor as workers to business firms or other employees.

Question 14

MACROeconomics

Answer 14

The branch of economics that focus on broad issues such as growth, unemployment, inflation, and trade balance.

Question 15

Market

Answer 15

Interaction between potential buyers and sellers; a combination of demand and supply.

Question 16

MICROeconomics

Answer 16

Branch of economics that focuses on actions on particular agents within the economy, like households, workers, and business forms.

Question 17

Monetary Policy

Answer 17

Policy that involves altering the level of interest rates, the availability of credit in the economy, and the extent of borrowing.

Question 18

Private Enterprise

Answer 18

System where private individuals or group of private individuals or group of private individuals own and operate he means of production (resources and businesses).

Question 19

Specialization

Answer 19

When workers or firms focus on particular tasks for which they are well-suited within the overall production process.

Question 20

Theory

Answer 20

A representation of an object or situation that is simplified while including enough of the key features to help us understand the topic.

Question 21

Traditional Economy

Answer 21

Typically an agriculture economy where things are done the same as they always have been done.

Question 22

Underground Economy

Answer 22

A market where the buyers and sellers make transactions in violation of one or more government regulations.

Question 23

Allocative Efficiency

Answer 23

When the mix of goods produced represents the mix that society most desires.

Question 24

Budget Constraint

Answer 24

All possible consumption combinations of goods that someone can afford, given the prices of goods, when all income is spent; the boundary of the opportunity cost.

Question 25

Comparative Advantage

Answer 25

When a country can produce a good at a lower cost in terms of other goods; or, when a country has a lower opportunity cost of production.

Question 26

Invisible Hand

Answer 26

Adam Smith’s concept that individuals’ self-interested behavior can lead to positive social outcome.

Question 27

Law of Diminishing Marginal Utility

Answer 27

As we consume more of a good or service, the utility we get from additional units of the good or service tends to become smaller than what we received from earlier units.

Question 28

Law of Diminishing Returns

Answer 28

As we add additional increments of resources to producing a good or service tends to become smaller than what we received from earlier units.

Question 29

Marginal Analysis

Answer 29

Examination of decisions on the margin, meaning a little more or less from the status quo.

Question 30

Normative Statement

Answer 30

Statement which describes the world as it is.

Question 31

Production Possibilities Frontier (PPF)

Answer 31

A diagram that shows the productivity efficient combinations of two products that an economy can produce given the resources it has available.

Question 32

Product Efficiency

Answer 32

When it is impossible to produce more of one good (or service) without decreasing the quantity produced of another good (or service).

Question 33

Sunk Costs

Answer 33

Costs that we make in the past that we cannot recover.

Question 34

Utility

Answer 34

Satisfaction, usefulness, or value one obtains from consuming goods and services.