Econ Q1 Flashcards

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Questions and Answers

Two key groups participate in markets. A ___ consists of all individuals in a home.

household

____ are suppliers of goods and services.

firms

We can use a simple economic model called the ____ to see how participants in markets are linked.

circular-flow diagram

Which variable causes the quantity to change from point C to point D in the graph?

the third variable Signup and view all the answers

What do economists mean by scarcity?

unlimited wants exceed limited resources Signup and view all the answers

Which of the following is not scarce according to the economic definition?

None of the above Signup and view all the answers

In economics, the term capital refers to?

physical capital, such as machinery, that is used to produce other goods Signup and view all the answers

Why shouldn't you always unload the dishwasher if you are better at it than your spouse?

You may be even better at some other household task and must consider the opportunity cost. Signup and view all the answers

Is Microsoft's pricing decision of $599 for a copy of Windows 7 rational?

Yes, if they have weighed all known benefits and costs. Signup and view all the answers

______ is the study of the choices people make to attain their goals, given their scarce resources.

economics Signup and view all the answers

What inference can be drawn about Choco Dream's production of liquor chocolates?

Choco Dream faces increasing marginal opportunity cost. Signup and view all the answers

What can be concluded when the number of dating websites increases and the number of marriages also increases?

Nothing can be concluded as there is likely to be an omitted variable. Signup and view all the answers

Which events would create economic growth, shifting the production possibilities frontier outward?

All of the above Signup and view all the answers

What are the two main categories of participants in markets?

Firms and households. Signup and view all the answers

Which participants are of greatest importance in determining what goods and services are produced?

Households. Signup and view all the answers

Which steps should you follow when using a formula?

All of the above Signup and view all the answers

Why are copyrights considered a 'tax' on readers?

Copyrights limit the supply of related creative work, resulting in higher prices. Signup and view all the answers

Why do governments provide a legal framework for copyrights?

Copyrights provide needed protection for authors and creators of movies or other artistic works. Signup and view all the answers

The basis for trade is comparative advantage, not absolute advantage.

True Signup and view all the answers

Which field covers topics such as inflation or unemployment?

Macroeconomics. Signup and view all the answers

Why might studying economics prepare you for a managerial or governmental role?

Economics teaches us how to look at the trade-offs involved in every decision. Signup and view all the answers

What are the inputs used to make goods and services referred to as?

factors of production. Signup and view all the answers

What does a production possibilities frontier show?

The maximum attainable combinations of two goods that may be produced with available resources. Signup and view all the answers

How can economic efficiency be shown?

With points on the production possibilities frontier. Signup and view all the answers

How can economic inefficiency be shown?

With points inside the production possibilities frontier. Signup and view all the answers

When will the production possibilities frontier shift outward?

If technological advances occur. Signup and view all the answers

What does the circular-flow diagram illustrate?

How households and firms are linked through product and factor markets. Signup and view all the answers

What are the two variables in the circular-flow diagram?

Price (dollars per bushel) on the vertical axis and quantity (bushels per week) on the horizontal axis. Signup and view all the answers

What do the production possibilities frontiers illustrate?

Both the labor force and capital stock increasing. Signup and view all the answers

How do economists assume people behave?

They use all available information as they take actions intended to achieve their goals. Signup and view all the answers

What does it indicate if country ABC can produce a unit of good 1 by sacrificing fewer units of good 2 than country XYZ?

Country ABC has a comparative advantage in producing good 1. Signup and view all the answers

Study Notes

Market Participation

Two main groups in markets: households and firms.
Households consist of all individuals in a home, while firms are suppliers of goods and services.
The circular-flow diagram illustrates how households and firms interact through product and factor markets.

Variables and Changes

Changes in quantity on a graph can be influenced by three variables: quantity, price, and a third variable, which is the causal factor.

Scarcity in Economics

Scarcity refers to the concept that unlimited wants exceed limited resources, necessitating choices in resource allocation.
According to economic definitions, everything is scarce, leaving no exceptions.

Capital in Economics

The term capital is used to describe physical capital, such as machinery that produces other goods.

Opportunity Cost

Even if skilled in a task, one should consider opportunity cost – the benefits of choosing an alternative task.

Rational Pricing Decisions

A pricing decision, such as Microsoft charging $599 for Windows 7, is deemed rational if managers factor in all known benefits and costs.

Economics Definition

Economics is the study of choices people make to achieve goals with scarce resources.

Production Possibilities Frontier (PPF)

The PPF demonstrates the maximum combinations of two goods produced with available resources and can shift outward with technological advances.
Economic efficiency is shown by points on the frontier, while inefficiencies are represented by points inside it.

Economic Growth

Economic growth is achieved when events shift the PPF outward, improving production capacity.

Role of Households

Households have the greatest influence on determining the types of goods and services produced in the economy.

Macroeconomics vs. Microeconomics

Macroeconomics covers topics such as inflation and unemployment, contrasting with microeconomic topics that focus on individual markets.

Preparing for Leadership

Studying economics equips individuals with the skills to analyze trade-offs, crucial for top management roles or government leadership.

Factors of Production

Inputs for goods and services are classified as factors of production, essential for economic analysis.

Rational Behavior Assumption

Economists operate on the assumption that people are rational, using available information to pursue their goals effectively.

Comparative Advantage

A country can possess a comparative advantage in producing a good if it sacrifices fewer units of another good in the process.

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Description

Test your knowledge on key economic terms and concepts with these flashcards for Economics Quarter 1. This quiz covers foundational ideas like the circular-flow diagram and the roles of households and firms in the market. Perfect for reinforcing your understanding of microeconomics.