Microeconomic Review

Question 1

What are the types of resources in production?

Answer 1

Land, Labour, Capital, Entrepreneurship

These are the primary factors of production.

Question 2

What does ‘Land’ refer to in the context of resources?

Answer 2

Natural resources used to produce goods and services, such as water, land itself, and minerals.

Land encompasses all natural elements that contribute to production.

Question 3

Define ‘Labour’ in production.

Answer 3

Human effort, both physical and mental, used in the production process.

This includes the work of employees, workers, and professionals.

Question 4

What is meant by ‘Capital’ in the production process?

Answer 4

Man-made resources used in production, including machinery, tools, equipment, buildings, and technology.

Capital is essential for enhancing productivity.

Question 5

What is ‘Entrepreneurship’?

Answer 5

The ability and willingness of individuals to take risks, innovate, and organize resources to produce goods and services.

Entrepreneurs are key drivers of economic growth and development.

Question 6

True or False: Entrepreneurs do not play a significant role in economic growth.

Answer 6

False

Entrepreneurs are crucial for driving economic growth.

Question 7

Fill in the blank: _______ refers to all natural resources used to produce goods and services.

Answer 7

Land

Land includes resources like water and minerals.

Question 8

Fill in the blank: _______ includes human effort in the production process.

Answer 8

Labour

Labour encompasses both physical and mental contributions.

Question 9

Fill in the blank: _______ refers to man-made resources in production.

Answer 9

Capital

This includes tools, machinery, and technology.

Question 11

What is opportunity cost?

Answer 11

The value of the next best alternative that you give up when you make a choice.

It’s a fundamental concept in economics that helps us understand the trade-offs involved in decision-making.

Question 12

In the context of opportunity cost, what happens when a company decides to use all its resources to produce iPhones?

Answer 12

It cannot produce laptops simultaneously.

This illustrates the trade-offs involved in resource allocation.

Question 13

What is the opportunity cost of producing laptops instead of iPhones?

Answer 13

The reduced quantity of iPhones that could have been produced with those resources.

It represents the benefit or value sacrificed from not producing more iPhones.

Question 14

Fill in the blank: Opportunity cost helps us understand the ______ involved in decision-making.

Answer 14

trade-offs

Question 15

True or False: Opportunity cost is only relevant to financial decisions.

Answer 15

False

Opportunity cost is applicable to any decision-making scenario where resources are limited.

Question 17

What is economic theory?

Answer 17

A set of principles that explain economic phenomena, involving understanding how resources are produced, distributed, and consumed based on definitions, assumptions, and hypotheses.

Question 18

Define ‘variable’ in economic terms.

Answer 18

A factor that can be measured and can take on different values, such as price and quantity demanded.

Question 19

What is a graph in the context of economics?

Answer 19

A visual representation that shows how different variables relate to each other in a clear and efficient way.

Question 20

What are the three types of relationships that can exist between economic variables?

Answer 20

• Unrelated
• Negative
• Positive

Question 21

What does a positive relationship between variables mean?

Answer 21

Both variables move in the same direction.

Question 22

What does a negative relationship between variables indicate?

Answer 22

One variable moves up while the other moves down.

Question 23

What does it mean if two economic variables are unrelated?

Answer 23

One variable moves while the other remains unchanged.

Question 24

What is a Traditional Economy?

Answer 24

An economic system rooted in tradition, customs, and beliefs passed down over generations. People produce what they need to survive and trade within their community.

Examples include farming, hunting, and fishing.

Question 25

Define Free-Market Economy.

Answer 25

A system where individuals and private businesses make economic decisions based on supply and demand with minimal government intervention. Prices are determined by market exchanges. ## Footnote Buyers and sellers freely exchange goods and services.

Question 26

What characterizes a Command Economy?

Answer 26

The government controls major aspects of the economy, including production, pricing, and distribution of goods. Decisions are centrally planned to achieve specific societal goals. ## Footnote Often associated with socialist or communist systems.

Question 27

What is a Mixed Economy?

Answer 27

A system that combines elements of both free-market and command economies. Governments regulate certain sectors or provide public services while private enterprise drives much of the economy. ## Footnote Balances public and private interests.

Question 28

What does an outward shift of the PPC indicate?

Answer 28

An increase in an economy's capacity to produce. ## Footnote This reflects overall economic growth.

Question 29

What shape of the PPC reflects increasing opportunity cost?

Answer 29

Concave (Bowed Out) ## Footnote As more of one good is produced, the opportunity cost of producing additional units increases.

Question 30

What does a straight line PPC represent?

Answer 30

Constant opportunity costs ## Footnote This scenario is rare in real-world situations.

Question 31

What does it mean when a point is inside the PPC curve?

Answer 31

Underutilization of resources or inefficiency ## Footnote Resources are not being used to their full potential.

Question 32

What does a point outside of the PPC curve represent?

Answer 32

Unattainable production with current resources ## Footnote This indicates that the production level cannot be achieved with available resources.

Question 33

What causes an outward shift in the PPC?

Answer 33

Improved technology, increase in resources (e.g., labor, capital), better education or training (human capital) ## Footnote These factors enhance the productive capacity of the economy.

Question 34

What leads to an inward shift of the PPC?

Answer 34

Loss of resources (e.g., natural disasters, war), decline in technology or productivity ## Footnote Such events reduce the economy's capacity to produce goods and services.

Question 35

What does scarcity refer to in economics?

Answer 35

Resources are limited, so economies must make choices about what to produce. ## Footnote Scarcity is a fundamental concept that forces trade-offs and prioritization in resource allocation.

Question 36

What are trade-offs in the context of production?

Answer 36

Producing more of one good means producing less of another. ## Footnote Trade-offs illustrate the opportunity cost associated with resource allocation decisions.

Question 37

What is opportunity cost?

Answer 37

The cost of the next best alternative foregone when a choice is made. ## Footnote Opportunity cost is a critical concept in decision-making processes.

Question 38

Define productive efficiency.

Answer 38

Points on the curve represent maximum output with given resources. ## Footnote Productive efficiency indicates that resources are used in the most effective way possible.

Question 39

What is allocative efficiency?

Answer 39

The specific point on the curve that reflects societal preferences. ## Footnote Allocative efficiency occurs when resources are distributed in a way that maximizes the overall satisfaction of society.

Question 41

Define function in economics

Answer 41

A relationship that expresses how one economic variable depends on one or more other variables ## Footnote Example: A production function shows the relationship between inputs (like labor and capital) and the output produced.

Question 42

What is entrepreneurship?

Answer 42

The process of identifying opportunities, taking financial and personal risks to establish a business, and creating value for society ## Footnote Entrepreneurs often drive innovation and contribute to economic growth by creating jobs and goods or services.

Question 43

What is an economic model?

Answer 43

A simplified framework, often in the form of equations, graphs, or diagrams, used to explain and predict real-world economic behaviors and phenomena by making certain assumptions.

Question 44

Define economic growth

Answer 44

The increase in a country's output of goods and services over time, often measured as the rise in Gross Domestic Product (GDP) ## Footnote It reflects improved productivity and standard of living.

Question 45

Define microeconomic

Answer 45

The branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of resources.

Question 46

What is elasticity of demand?

Answer 46

A measure of how much the quantity demanded of a good responds to a change in the price of that good.

Question 47

What is a mixed economy?

Answer 47

An economic system that combines elements of both capitalism and socialism.

Question 48

Fill in the blank: A production function shows the relationship between inputs (like labor and capital) and the _______.

Answer 48

[output produced]

Question 49

True or False: Economic growth is only measured by the rise in Gross Domestic Product (GDP).

Answer 49

False ## Footnote While GDP is a primary measure, economic growth can also be reflected in other factors like productivity and standard of living.

Question 50

Fill in the blank: An economic model is used to explain and _______ real-world economic behaviors.

Answer 50

[predict]

Question 51

Define gradient in economics

Answer 51

The rate of change of a function with respect to one of its variables.