Mid Term #1

Question 1

Term: Comparative Advantage

Answer 1

Comparative advantage is an economic law referring to the ability of any given economic actor to produce goods and services at a lower opportunity cost than other economic actors.

Question 2

Term: SWEET

Answer 2

Students Who Enjoy Economic Thinking

Question 3

Term: Law of Supply

Answer 3

The law of supply is the microeconomic law that states that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa.

Question 4

Term: Opportunity Cost

Answer 4

An opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action.

Question 5

Term: Marginal Cost

Answer 5

The marginal cost of production is the change in total cost that comes from making or producing one additional item.

Question 6

Term: Subjective Value

Answer 6

The idea that an object’s value is not inherent, and is instead worth more to different people based on how much they desire or need the object.

Question 7

Term: Diminishing Marginal Utility

Answer 7

The law of diminishing marginal utility is a law of economics stating that as a person increases consumption of a product while keeping consumption of other products constant, there is a decline in the marginal utility that person derives from consuming each additional unit of that product.

Question 8

Term: Equilibrium Price

Answer 8

The equilibrium price is where the supply of goods matches demand.

Question 9

Term: There Is No Free Lunch

Answer 9

“A free lunch is a situation in which a good or service is received at no cost, with the true cost of the good or service ultimately borne by some party, which may even include the recipient.”

Question 10

Term: Marginal Benefit

Answer 10

A marginal benefit is the additional satisfaction or utility that a person receives from consuming an additional unit of a good or service.

Question 11

Term: Gains From Trade

Answer 11

Gains from trade refers to net benefits to agents from allowing an increase in voluntary trading with each other.

Question 12

Term: Type I Error

Answer 12

Type I Error occurs when a hypothesis is true, but is rejected.

Question 13

Term: Sunk Cost

Answer 13

A sunk cost is a cost that has already been incurred and thus cannot be recovered.

Question 14

Term: Spontaneous Order

Answer 14

Spontaneous order is an order which emerges as result of the voluntary activities of individuals and not one which is created by a government

Question 15

Term: Incentives

Answer 15

Incentives are a thing that motivates or encourages one to do something.

Question 16

Term: Production Possibilities Frontier

Answer 16

“The production possibility frontier (PPF) is a curve depicting all maximum output possibilities for two goods, given a set of inputs consisting of resources and other factors.
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Question 17

Term: Transaction Costs

Answer 17

A transaction cost is a cost incurred in making an economic exchange of some sort, or in other words the cost of participating in a market.

Question 18

Term: Law of Demand

Answer 18

The law of demand is a microeconomic law that states, all other factors being equal, as the price of a good or service increases, consumer demand for the good or service will decrease, and vice versa.

Question 19

Term: Type II Error

Answer 19

Type II Error occurs when a hypothesis is false, but fails to be rejected.

Question 20

Term: Institutions

Answer 20

Institutions is a company or an organization that deals with money or with managing the distribution of money, goods, and services in an economy

Question 21

Term: Scarcity

Answer 21

“Scarcity refers to the basic economic problem, the gap between limited – that is, scarce – resources and theoretically limitless wants.
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Question 22

Term: Economic Freedom Index

Answer 22

A ranking of countries or states based on the number and intensity of government regulations on wealth-creating activity.

Question 23

Term: Specialization

Answer 23

Specialization is a method of production where a business, area or economy focuses on the production of a limited scope of products or services to gain greater degrees of productive efficiency within an overall system.