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?
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What do economists mean by scarcity?
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Which of the following is not scarce according to the economic definition?
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In economics, the term capital refers to?
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Why shouldn't you always unload the dishwasher if you are better at it than your spouse?
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Is Microsoft's pricing decision of $599 for a copy of Windows 7 rational?
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______ is the study of the choices people make to attain their goals, given their scarce resources.
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What inference can be drawn about Choco Dream's production of liquor chocolates?
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What can be concluded when the number of dating websites increases and the number of marriages also increases?
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Which events would create economic growth, shifting the production possibilities frontier outward?
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What are the two main categories of participants in markets?
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Which participants are of greatest importance in determining what goods and services are produced?
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Which steps should you follow when using a formula?
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Why are copyrights considered a 'tax' on readers?
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Why do governments provide a legal framework for copyrights?
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The basis for trade is comparative advantage, not absolute advantage.
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Which field covers topics such as inflation or unemployment?
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Why might studying economics prepare you for a managerial or governmental role?
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What are the inputs used to make goods and services referred to as?
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What does a production possibilities frontier show?
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How can economic efficiency be shown?
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How can economic inefficiency be shown?
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When will the production possibilities frontier shift outward?
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What does the circular-flow diagram illustrate?
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What are the two variables in the circular-flow diagram?
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What do the production possibilities frontiers illustrate?
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How do economists assume people behave?
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What does it indicate if country ABC can produce a unit of good 1 by sacrificing fewer units of good 2 than country XYZ?
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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.