Unit 1

Question 1

Trade off

Answer 1

an alternative that we sacrifice when we make a decision

Question 1

Economics

Answer 1

the study of how society manages its scarce resources

Question 2

Scarcity

Answer 2

A situation in which unlimited wants exceed the limited resources available to fulfill those wants

Question 3

constraint

Answer 3

limitation or restriction of resources (time, money, etc)

Question 4

opportunity cost

Answer 4

whatever must be given up to obtain some item

Question 5

Microeconomics

Answer 5

the study of the economic behavior and decision making of small units, such as individuals, families, and businesses

Question 6

Macroeconomics

Answer 6

the study of economy-wide phenomena, including inflation, unemployment, and economic growth

Question 7

goods

Answer 7

Items purchased to satisfy needs and wants

Question 8

Services

Answer 8

Items of value that cannot be seen or touched

Question 9

Consumer

Answer 9

A person who purchases goods and services for personal use

Question 10

consumption

Answer 10

spending by households on goods and services.

Question 11

Economic Resources

Answer 11

the means through which goods and services are produced

Question 12

factors of production

Answer 12

land, labor, capital, entrepreneurship

Question 13

land

Answer 13

all natural resources used to produce goods and services

Question 14

labor

Answer 14

Human effort directed toward producing goods and services. “Human capital”

Question 15

Capital

Answer 15

the tools, equipment, machinery, and factories used in the production of goods and services

Question 16

human capital

Answer 16

the knowledge and skills that workers acquire through education, training, and experience

Question 17

Entrepreneurship

Answer 17

the process of starting, organizing, managing, and assuming the responsibility for a business

Question 18

Rival nature

Answer 18

Only one person can consume them at a time

Question 19

non-rival nature

Answer 19

more than one person or business at a time can use such information without depleting the supply for others

Question 20

Economic system

Answer 20

Defined by the way a society answers three questions: What goods and services will be produces? How will those goods and services be produced? Who will consume the goods and services?

Question 21

Means of Production

Answer 21

Everything used to supply goods and services, such as farmland, copper mines, factories, office buildings, robots, and super computers.

Question 22

Traditional Economy

Answer 22

An economy in which production is based on customs and traditions and economic roles are typically passed down from one generation to the next.

Question 23

command economy

Answer 23

An economic system in which the government makes all economic decisions.

Question 24

Market Economy (Capitalism)

Answer 24

An economic system based upon the fundamentals of private property, freedom, self-interest, and prices

Question 25

mixed economy

Answer 25

both government and individuals make decisions about economic resources. (Most Countries in the World)

Question 26

Production Possibilities Curve (PPC)

Answer 26

A basic economic model that illustrates scarcity and opportunity costs.

Question 27

Efficiency

Answer 27

using resources in such a way as to maximize the production of goods and services

Question 28

underutilized

Answer 28

not using all possible resources

Question 29

contraction

Answer 29

a decline in output

Question 30

growth

Answer 30

Increasing production

Question 31

absolute advantage

Answer 31

the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources

Question 32

comparative advantage

Answer 32

the ability to produce a good at a lower opportunity cost than another producer

Question 33

Specialization

Answer 33

focusing on the production of specific goods so that more products can be produced with the same amount of labor

Question 34

division of labor

Answer 34

the assignment of different parts of a manufacturing process or task to different people in order to improve efficiency.

Question 35

gains from trade

Answer 35

result when two countries specialize in commodities in which they have a comparative advantage and exchange with one another, allowing each to benefit from increased consumption of goods they would not have without trade.

Question 36

cost-benefit analysis

Answer 36

economic model that compares the marginal costs and marginal benefits of a decision

Question 37

rational agents

Answer 37

free agents capable of making their own decisions, setting their own goals, and guiding their conduct by reason

Question 38

Explicit Opportunity Cost

Answer 38

Opportunity costs that involve a payment of some kind

Question 39

Implicit Opportunity Cost

Answer 39

is one (cost) an individual or a business gives up in order to use a resource that it already has or is using

Question 40

Utility

Answer 40

Ability or capacity of a good or service to be useful and give satisfaction to someone.

Question 41

Total Benefits

Answer 41

The amount of satisfaction people receive from all of the goods and services they use.

Question 42

Total Costs

Answer 42

The time, effort, and expense they spend to obtain goods and services.

Question 43

Total Net Benefits

Answer 43

the difference between total benefits and total costs

Question 44

optimal choice

Answer 44

The level at which you receive the greatest benefit for the least cost.

Question 45

marginal benefit

Answer 45

the additional benefit you gain from producing each additional unit. MB = Change in total benefits/Change in Output

Question 46

marginal cost

Answer 46

How much more you would have to spend to produce additional units.

Question 47

Consumer Choice Theory

Answer 47

The theory relating consumer demand curves to consumer preferences.

Question 48

diminishing marginal utility

Answer 48

decrease in satisfaction or usefulness from having one more unit of the same product

Question 49

marginal utility

Answer 49

satisfaction or usefulness obtained from acquiring one more unit of a product

Question 50

marginal benefit

Answer 50

the additional benefit to a consumer from consuming one more unit of a good or service

Question 51

marginal analysis

Answer 51

analysis that involves comparing marginal benefits and marginal costs

Question 52

optimal quantity

Answer 52

the quantity that generates the highest possible total profit. MB=MC

Question 53

sunk cost

Answer 53

a cost that has already been committed and cannot be recovered

Question 54

utility maximizing rule

Answer 54

The principle that to obtain the greatest utility, the consumer should allocate money income so that the last dollar spent on each good or service yields the same marginal utility.