Economics Chapter 1 Flashcards
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Questions and Answers

What is the highest-valued alternative that is given up when choosing to produce or consume one good over another?

Opportunity cost

What combinations are attainable given a consumer's budget line?

  • Involves entire consumption (correct)
  • Fall on budget line (correct)
  • Fall inside budget line (correct)
  • On midpoint of budget line (correct)

    • A consumer's ___________ line or constraint shows various combinations of two products that can be purchased with a specific amount of income.

    budget

    Economics, as a social science, is concerned with how to make money.

    <p>False</p> Signup and view all the answers

    ________ is the notion that, in general, the quantity desired of economic goods (or services) exceeds the quantity available.

    <p>Scarcity</p> Signup and view all the answers

    Which of the following describes the concept of rational self-interest?

    <p>Individuals weigh the costs and benefits of their decisions</p> Signup and view all the answers

    What type of economics exemplifies the trade deficit between the U.S. and China growing between 2000 and 2009?

    <p>Macroeconomics</p> Signup and view all the answers

    What type of economics is illustrated by Chase Bank lowering its interest rate on business loans?

    <p>Microeconomics</p> Signup and view all the answers

    What economic concept is represented by the real GDP growing by 2.2 percent in 2007?

    <p>Macroeconomics</p> Signup and view all the answers

    What economic event caused the price of oranges to rise due to an unexpected freeze?

    <p>Microeconomics</p> Signup and view all the answers

    What reflected an example of macroeconomics when the Consumer Price Index rose by 3 percent in 2007?

    <p>Macroeconomics</p> Signup and view all the answers

    What type of economics is shown by a U.S. software firm laying off workers and transferring work to India?

    <p>Microeconomics</p> Signup and view all the answers

    The three main decisions that must be addressed by an economic system include what goods are to be produced, who will produce them, and where they will be produced.

    <p>False</p> Signup and view all the answers

    __________ is the discipline of economics concerned with individual units such as a person, household, firm, or industry.

    <p>Microeconomics</p> Signup and view all the answers

    What branch of economics studies the economy as a whole or in the aggregate?

    <p>Macroeconomics</p> Signup and view all the answers

    The economic question of '__________ to produce' is about decisions related to the mix (quantity and type) of goods and services to make available in a given economy.

    <p>what to produce</p> Signup and view all the answers

    Which of the following are all possible because of private property rights in a market system?

    <p>Economic growth</p> Signup and view all the answers

    An _______ outcome is one each individual affected is treated fairly.

    <p>Equitable</p> Signup and view all the answers

    Economics assumes that human behavior reflects '_______ self-interest.'

    <p>Rational self-interest</p> Signup and view all the answers

    When utilizing scarce resources to produce goods or services, there is a cost borne by society. What is this commonly referred to as?

    <p>No free lunch</p> Signup and view all the answers

    In economics, an incremental or gradual change is also known as a _________.

    <p>marginal change</p> Signup and view all the answers

    Which of the following define positive economics?

    <p>Statements based on facts</p> Signup and view all the answers

    Normative economics is based on what?

    <p>Subjective or value judgments</p> Signup and view all the answers

    Economics is a ________ science concerned with the allocation of __________ resources to meet the unlimited wants of the members of a given society.

    <p>social; scarce</p> Signup and view all the answers

    Consumers derive personal satisfaction from goods and services by which of the following methods?

    <p>Allocating their time, energy, money, and other resources to maximize satisfaction</p> Signup and view all the answers

    What is the economic decision-making process considered rational when individuals do?

    <p>Compare benefits and costs</p> Signup and view all the answers

    _______ economics focuses on facts and cause and effect relationships.

    <p>Positive</p> Signup and view all the answers

    In macroeconomics, an ________ is a collection of specific economic units treated as if they were one unit.

    <p>aggregate</p> Signup and view all the answers

    Private property rights, coupled with the freedom to negotiate binding legal _______ enables individuals and businesses to obtain, use, and dispose of property resources as they see fit.

    <p>contracts</p> Signup and view all the answers

    _______ economic analysis concerns what is, whereas ___________ economic analysis represents subjective statements about what ought to be.

    <p>Positive</p> Signup and view all the answers

    Which of the following describes the role of government in the United States' form of capitalism?

    <p>Modifies the distribution of income</p> Signup and view all the answers

    When consumers purchase a good or service, they do so in order to _______ their level of utility or well-being.

    <p>increase</p> Signup and view all the answers

    A consumer will purchase a good or service when the marginal benefit is greater than or equal to what?

    <p>Marginal cost</p> Signup and view all the answers

    The economic perspective focuses on _________; therefore, the decision-maker must compare incremental benefits and costs.

    <p>Marginal analysis</p> Signup and view all the answers

    Private property helps to facilitate exchange in which type of economic system?

    <p>Free market system</p> Signup and view all the answers

    Which of the following economic measures are considered in macroeconomic analysis?

    <p>National income</p> Signup and view all the answers

    Property rights encourage which of the following?

    <p>Investment</p> Signup and view all the answers

    Positive economics encourages value judgments.

    <p>False</p> Signup and view all the answers

    Which of the following best clarifies the 'other-things-equal' assumption?

    <p>All variables except those under immediate consideration are held constant for a particular analysis</p> Signup and view all the answers

    Which of the following are issues most explored in microeconomics?

    <p>A firm's decision to hire more workers</p> Signup and view all the answers

    Which of the following statements or questions represent positive economics?

    <p>The unemployment rate in Mexico is higher than in the U.S.</p> Signup and view all the answers

    When individuals take into account the costs and benefits of their economic decisions, these decisions are considered to be __________.

    <p>rational</p> Signup and view all the answers

    Which of the following statements or questions represent normative economics?

    <p>The government should increase the minimum wage</p> Signup and view all the answers

    Positive economics is concerned with _________, whereas normative economics deals with __________.

    <p>What is</p> Signup and view all the answers

    Which of the following define ceteris paribus?

    <p>The idea that factors other than those being considered in a particular analysis do not change</p> Signup and view all the answers

    In the type of capitalism practiced in the U.S. and most other countries, the government plays __________ role.

    <p>a substantial</p> Signup and view all the answers

    In economics, the term __________ describes spending that pays for the production and accumulation of capital goods.

    <p>investment</p> Signup and view all the answers

    The factors of production include which of the following?

    <p>Entrepreneurship</p> Signup and view all the answers

    In addition to entrepreneurship, the factor of production defined as __________ consists of the physical actions and mental activities that people contribute to the production of goods and services.

    <p>Labor</p> Signup and view all the answers

    The situation where one thing has to be given up in order to have some other item is called a:

    <p>A trade-off</p> Signup and view all the answers

    Factories, storage, transportation and distribution facilities, as well as tools and machinery are all examples of physical ____________ goods.

    <p>capital</p> Signup and view all the answers

    From an economic standpoint, _______ includes all natural resources used in the production process.

    <p>land</p> Signup and view all the answers

    Combinations of goods that fall on the production possibilities curve are:

    <p>Represent economic growth</p> Signup and view all the answers

    What does a production possibilities curve (frontier) show?

    <p>The attainable combination of two goods that can be produced given a specific set of resources.</p> Signup and view all the answers

    Capital goods differ from consumer goods in that:

    <p>Capital goods satisfy consumer wants indirectly through the production of consumer goods</p> Signup and view all the answers

    Arable land, water machinery, and professional baseball players are all considered scarce economic __________ to production.

    <p>inputs</p> Signup and view all the answers

    Combinations of output that fall inside the production possibilities curve represent:

    <p>Less total output in an economy</p> Signup and view all the answers

    Select all choices from the following that would be considered land to an economist.

    <p>Water</p> Signup and view all the answers

    Points lying _______ the production possibilities curve (frontier) would represent a greater but unachievable level of output than that at any point on the curve.

    <p>outside</p> Signup and view all the answers

    Constant opportunity cost is best represented by:

    <p>The straight-line production possibilities</p> Signup and view all the answers

    As individuals' incomes rise, they will still be confronted with which of the following?

    <p>Trade-offs</p> Signup and view all the answers

    Points _______ the production possibilities curve are attainable so long as an economy uses all of its available resources.

    <p>Along</p> Signup and view all the answers

    A nation's production possibilities curve (frontier) can shift outward due to:

    <p>Specialization and trade</p> Signup and view all the answers

    In economics, investment describes spending:

    <p>That pays for the production and accumulation of capital goods</p> Signup and view all the answers

    What does each point on a production possibility represent?

    <p>Efficiency in production</p> Signup and view all the answers

    Points lying _______ the production possibilities curve (frontier) are unattainable with the current availability of resources and technology.

    <p>outside</p> Signup and view all the answers

    Which of the following best describes the relationship between trade-offs and opportunity costs?

    <p>As you give up consumption or production of one good over another, an opportunity cost is incurred</p> Signup and view all the answers

    The importance of the production possibilities model is to show the different combinations of goods and services that society can produce:

    <p>Given a fixed amount of resources</p> Signup and view all the answers

    What is specialization in economics?

    <p>About an individual or firm using available resources to produce one or only a few goods and services.</p> Signup and view all the answers

    What drives the law of increasing opportunity costs?

    <p>Resources that are not equally productive in the production of different goods or interchangeable.</p> Signup and view all the answers

    As more and more of a particular good is produced, which of the following rises?

    <p>Opportunity costs</p> Signup and view all the answers

    Trade-offs arising from limited incomes give rise to:

    <p>Opportunity costs</p> Signup and view all the answers

    Why do economists not include money as a factor of production?

    <p>Money is a medium of exchange rather than an input to the production of goods and services.</p> Signup and view all the answers

    Which of the following best represents the relationship between a capital good and a consumer good or service?

    <p>A commercial baking oven and loaves of bread</p> Signup and view all the answers

    Study Notes

    Opportunity Cost and Economic Concepts

    • Opportunity cost is the highest-valued alternative sacrificed when choosing between goods.
    • A budget line represents combinations of goods consumers can buy based on income.
    • Economics is a social science not primarily concerned with making money.

    Scarcity and Rational Self-Interest

    • Scarcity refers to the general condition where demand exceeds supply.
    • Rational self-interest involves individuals pursuing opportunities to increase satisfaction while weighing costs and benefits.

    Macroeconomics vs. Microeconomics

    • Macroeconomics focuses on the economy as a whole, considering national metrics like GDP growth and trade deficits.
    • Microeconomics examines individual economic units like consumers and firms, including specific pricing and employment decisions.

    Economic Decision-Making

    • Positive economics is based on factual, measurable statements, while normative economics involves value judgments.
    • Rational economic decisions occur when individuals compare costs and benefits.

    Role of Government and Economic Rights

    • The government plays a substantial role in U.S. capitalism by providing goods, regulating distribution of income, promoting stability, and establishing economic rules.
    • Private property rights enable individuals to exchange, innovate, and invest, contributing to economic growth.

    Production and Capital Goods

    • The factors of production include land, labor, capital, and entrepreneurship.
    • Capital goods are used to produce consumer goods, indirectly satisfying consumer wants.

    Production Possibilities Model

    • The production possibilities curve illustrates the maximum output that can be achieved with available resources.
    • Points on the curve indicate efficiency, while points inside reflect inefficiency.
    • An outward shift in the production possibilities curve can occur due to improved resources or techniques.

    Specialization and Trade-offs

    • Specialization involves focusing resources on producing a limited range of goods.
    • Trade-offs illustrate the relationship between choices and opportunity costs, where giving up one good incurs the cost of a forgone alternative.

    Economic Resources and Investment

    • Economic resources are considered scarce, and their allocation comes with costs for society.
    • Investment is defined as spending that helps in the production and accumulation of capital goods necessary for economic growth.

    Marginal Analysis

    • Marginal change refers to incremental adjustments in economic decision-making.
    • Decisions are rational when the expected marginal benefit equals or exceeds the marginal cost.

    Ceteris Paribus Principle

    • The ceteris paribus assumption holds that all relevant factors apart from those being analyzed remain constant.

    Importance of Economic Analysis

    • Analyzing the interplay of various economic factors, including employment and international trade, is crucial for understanding macroeconomic stability.
    • Identifying production possibilities enables assessment of resource efficiency within an economy.

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    Test your understanding of key concepts from Economics Chapter 1 with these flashcards. Topics include opportunity cost and budget lines, essential for grasping the fundamentals of economic decision-making. Perfect for students looking to reinforce their knowledge!

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