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Test 1 Flashcards

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1
Q

Choices must be made to use resources……

A

Effectively

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2
Q

What is economics?

A

The social science concerned with making optimal choices unnder conditions of scarcity

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3
Q

What is opportunity cost?

A

What you give up to get something; Every choice involves a sacrifice;

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4
Q

Why is an opportunity cost necessary?

A

Because economic wants excees society’s productive capacity so one has to make choices

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5
Q

There would be no need for opportunity cost if

A

if the resources, or inputs / factors of production, to obtain economic wants were unlimited then every want would have been satisified and no choices would have been necessary to make

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6
Q

every resource is limited so we have to decide what….

A

we want to give up producing

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7
Q

we make decisions in economics to maximize

A

satisfaction

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8
Q

define ‘puposeful behavior’

A

people make decicions with a desired outcome in mind

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9
Q

Wrong decisions can be made because

A

we don’t have all the information and we feel that we can derive utility by helping others

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10
Q

in economics, how can we tell is we made the right/wrong decision

A

time

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11
Q

how do we decide what to produce?

A

weigh marginal benefit and cost

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12
Q

every time we make a choice we are weighing……

A

the marginal benefit and cost

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13
Q

what does marginal mean?

A

‘extra’ or ‘additional’

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14
Q

if marginal benefit is greater than marginal cost…..

A

proceed with the action, because that is rational and will maximize utility

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15
Q

If marginal cost is greater than marginal benefit…

A

do not proceed with the action

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16
Q

what are economic theories?

A

generalizations based on hypothesis tested and supported with observations

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17
Q

economics relies on _________ method

A

scientific

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18
Q

what are the steps of economics using the scientific method

A

observe the real world -> formulate hypothesis -> test the hypothesis -> accept, reject, or modify the hypothesis -> continue to test the hypothesis (if necessary)

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19
Q

define an economic law or an economic principle

A

a well-tested and widely accepted theory; a statement about economic behavior or the economy that enables predictions of the probable effects of certain actions

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20
Q

examples of economic law

A

people buy more of an object when it is cheaper; law of increasing opportunity cost

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21
Q

What are economic principles?

A

(i). generalizations - ecpressed as the tendencies of typical or average consumer, workers or business firms
(ii). rely on other-things-equal assumption - the assumption that factors other than those being considered do not change
(iii) use graphical expressions

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22
Q

with economic principles, how many things will be changed at a time and why?

A

one - to assess impact

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23
Q

what is ceteris paribus?

A

factors other than the ones considered do not change

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24
Q

what is microeconomics?

A

the study of the individual consumer, firm, or market; studying a specific economic unit; studies the behaviors of sspecific economic units that make up the economic system

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25
Examples of microeconomics
change in the price of laptops, smartphones, oranges, apples, cars, etc.
26
what is macroeconomics?
study of the entire economy; study economy-wide (or national) unemployment, income, inflation, and business cycles patterns; a specific firm is not singled out - everything is assessed
27
examples of macroeconomics
the unemployment rates in the US, inflation rates in the US
28
microeconomics vs macroeconomics?
microeconomics is the study of individual units in the economy macroeconomics is the study of the entire economy
29
what is positive economics?
deals with factual statements, not opinions or value judgements
30
examples of positive economics
Federal Reserve is the central bank of the United States; Washington DC is the capital of the United States
31
what is normative economics
deals with what something ought to be; often includes the words 'ought' or 'should'
32
Example of normative economics
When interest rates decline, the stock market should soar; The passage of the USMCA trade agreement is supposed to create domestic jobs
33
normative vs positive economics
normative - value judgements positive - factual judgements
34
What is the economizing problem?
the need to make choices because economic wants exceed economic means; i.e. how do we use our resources to satisfy unlimited wants?
35
what is the individual's economizing problem?
limited income and unlimited wants
36
what is a budget line?
shows all possible combinations of two goods that can be purchased, given money, income, and the prices of goods
37
on a budget line, an increase in money income will shift the budget line to the ______?
right (outwards)
38
on a budget line, a decrease in money income will shift the budget line to the ______?
left / inwards
39
the slope of the budget line is equal to the?
ratio of the prices of two goods
40
on a budget line, an increase in the purchase of one good leads to a ______ in the other good?
decrease
41
all points on the budget line illustrate .....
the maximum number of items that can be purchased given money income
42
all points to the left of the budget line are?
attainable, however the consumer does not maximize the number of two goods; not all income is exhausted
43
points to the right of the budget line are?
not attainable with the current income
44
when income increases, the budget line shifts to the ____ and _____ points become _____
right, unattainable, attainable
45
the slope of a budget line tells us the
opportunity cost
46
why are the economy's scarce resources/factors of production precious?
they are limited in nature
47
what are the economy's scarce resources?
land, labor, capital, and entrepreneurial ability; they are inputs used in the production process
48
what does capital refer to in economics?
machinery, tools, etc. used in the production process; ex: computer at work, crane
49
what does land refer to in economics?
natural resources
50
what does labor refer to in economics?
skills & talents of individuals
51
what does entrepreneurial ability refer to in economics?
someone who taken the initiative to combine land, labor, and capital in order to start up a business
52
Is money an economic resource?
No, because it does not produce anything by itself
53
If we want to create more consumer goods, we must give up more capital goods, why?
becasue of limited goods
54
What is a production possibilities model and what does it show?
different combinations of two goods that can be produced with a different set of resources
55
What does full-employment mean?
It doesn't mean the employment rate is 0; it means that all resources are utilized, nothing is wasted which means the economy is producing the maximum number of goods and services
56
What are the assumptions behind the PPC model?
(i) full employment- all available resources within an economy are utilized (ii) fixed resources - the amount of resources of an economy are constant (iii) fixed technology - the state of the technology is constant
57
What principle does the PPC illustrate?
that if all the resources of an economy are in use, more of one good can be procuced only if less of another good is produced (illustrated by negative slope)
58
What does the law of increasing opportuniy cost state?
If society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so
59
If we are inside the production possibilities curve, it means that resources are __________
wasted
60
If we are outside the production possibilites chart, it means that _______
the option is unattainable with currently technology
61
if we are operating on the the budget line of a production possibilities chart ____________
the economy is operating efficiently because all available resources are fully utilized
62
What shifts a PPC chart outwards/to the right?
Technological improvements
63
What happens with technological improvements on PPC charts?
what was previously unattainable would now become attainable where the economy would grow
64
What does not shift the PPC chart?
recession (economy will function in the curve)
65
What shifts the PPC chart inwards?
earthquake, nuclear attack, pandemic
66
Why would a PPC chart shift inwards during a natural disaster?
the resources would be destroyed
67
How do you find the optimal point on the PPC?
compare marginal benefits to marginal costs
68
What is the optimal point on the PPC chart?
when MB=MC
69
You do not want marginal _______ to exceed marginal __________
costs; benefits
70
Where the economy chooses to produce on the PPC today largely determines
the amount of economic growth that they will experience in the future
71
define present goods
goods that satisfy needs today and do nothing for us in the future; most of the goods we buy are present goods
72
International trade enables countries to
Specialize in the production of goods which they produce more efficiently than other countries
73
With international trade, resources are ......
allocated more efficiently meaning it essentially is the equivalent of an increase in resources
74
A country can make use of foreign resources through _______ leading to a _______ shift of the PPC
trade; rightward
75
what will cause a change in the budget line?
change in incomee
76
what will cause the budget line to rotate?
the price of both objects changing
77
what does the slope of a budget line show?
the ratio price of 2 goods (will always be negative) (-) Py/Px
78
what are the factors of production?
land, labor, capital, entrepreneurial ability
79
when mb=mc there is no incentive to......
change behavior

Economics (4 decks)

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