Basic Economic Concepts Quiz

When wants are unlimited and resources are limited, we face scarcity. This means we can't have everything we want.

Goods meant for direct consumption (like pizza) are consumer goods, while goods used to make other goods (like a pizza oven) are capital goods.

All the choices you give up when making a decision. Imagine a menu: every item you don't order is a trade-off.

The single best choice you give up when making a decision. It's the value of what you could have had.

A system where the government controls all resources and makes all economic decisions. Think of a strict, centralized planner.

Individuals own resources and make economic decisions in a free market. It's like a playground where everyone gets to choose.

A mix of both government control and individual ownership in the economy. Most countries have a mixed system.

A graph showing the maximum combination of two goods that can be produced with available resources. It's like a budget for production.

The additional cost of producing one more unit of output. It is calculated as the change in total cost divided by the change in output.

The average total cost of producing each unit of output. It is calculated as the total cost divided by the output.

The average fixed cost of producing each unit of output. It is calculated as the fixed cost divided by the output.

The average variable cost of producing each unit of output. It is calculated as the variable cost divided by the output.

The point where the price of a product falls below the minimum average variable cost. If the price falls below this point, it's more profitable for the firm to shut down production in the short run.

A market structure where there are many small firms, identical products, and easy entry and exit. Firms are price takers, meaning they have no control over the market price.

A market structure characterized by differentiated products, easy entry and exit, and some control over price. Firms engage in non-price competition to attract customers.

A market structure where a few large firms dominate the industry. There are high barriers to entry, firms have some control over price, and they are interdependent in their decision-making.

A situation where the additional benefit to society from producing a public good is greater than the additional cost.

The difference between the quantity produced in a free market and the socially optimal quantity, representing lost welfare due to market inefficiency.

A government policy that sets a price per unit produced to discourage excessive production.

A government policy that provides a financial incentive per unit produced to encourage additional production.

A situation where the consumption of a good by one person does not diminish the ability of others to enjoy it.

The inability to exclude non-paying individuals from enjoying the benefits of a good.

When a market fails to account for all costs and benefits, leading to an inefficient outcome.

A legal framework designed to resolve negative externalities by allowing parties to negotiate mutually beneficial solutions, regardless of property rights.

A situation where a single company controls a large majority of the market, often due to factors like economies of scale or control over crucial resources.

A situation where a firm can charge different prices to different customers for the same product or service.

The demand for resources is determined by the demand for the products they help produce.

The additional revenue generated by hiring an additional worker.

The additional cost of hiring an additional worker.

The number of workers businesses are willing and able to hire at different wage rates.

A barrier to entry that occurs when a firm has exclusive control over a resource.

Government policies and regulations that make it difficult for new businesses to enter a market.

A statistical measurement of income equality where perfect equality is 0 and perfect inequality is 1.

The ability of a country to produce a good or service at a lower opportunity cost than other countries.

A situation that results in external costs on others causing the marginal social cost to be higher than the marginal private cost.

Government payments to individuals or businesses designed to meet a specific objective rather than pay for goods or resources. (Ex: Welfare)

A situation that results in external benefits on others causing the marginal social benefit to be higher than the marginal private benefit.

The ability of countries to trade goods and services without government restrictions.

A lack of property rights causes individuals to uses resources in a way that is contrary to the benefits of society (example- overfishing).

Taxes imposed on goods imported from other countries. They act as a barrier to foreign trade and protect domestic industries from competition.

A limitation on the quantity of a particular good that can be imported from a specific country.

The value of one currency expressed in terms of another currency. It determines how much of one currency you need to buy a certain amount of another.

A record of all economic transactions between a country and the rest of the world, including trade, investments, and transfers.

The difference between a country's total exports and imports of goods and services. It reflects the net flow of goods and services across borders.