Economics Test 1: Chapters 1 & 2 Flashcards

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Questions and Answers

What is the basic economic problem?

Creating jobs

Dealing with limited resources (correct)

Maximizing profits

Increasing demand

Positive economics is based on?

Reality

Which of the following is an economic resource?

Natural

Capital

Human

All of the above (correct)

Economics is a?

Social Science Signup and view all the answers

Opportunity cost can be defined as?

What is lost when we make decisions Signup and view all the answers

When something is good for an individual but not good for society, it follows:

The Fallacy of Composition Signup and view all the answers

What does the production possibility curve illustrate?

If all the resources of an economy are fully used, more of one item could be produced only if less of another item is produced Signup and view all the answers

What does operating at a point inside a bowed-out production possibilities frontier indicate?

Unemployment Signup and view all the answers

"This automobile crash was caused by bad weather" is an example of the:

Fallacy of Single Causation Signup and view all the answers

On a graph, the production possibility curve represents:

The maximum potential output Signup and view all the answers

A chicken farm has three inputs: land, labor, and animal feed. The farmer can increase all inputs proportionally. This results in which economic law?

The law of increasing returns to scale Signup and view all the answers

What is not an illustration of the notion of opportunity cost?

A growing economy can produce more ice cream and more ice cream comes at the same time Signup and view all the answers

When a government chooses to build a hospital, those resources are no longer available to build a new highway. This best illustrates the economic concept of?

Scarcity Signup and view all the answers

The opportunity cost of buying a $10 CD is?

Your best alternative use of the $10 Signup and view all the answers

A movement along the production possibility curve will result from?

A re-allocation of available production resources Signup and view all the answers

Which of the following is an example of a normative statement?

Households should save more Signup and view all the answers

Every economy must answer the questions: what to produce, how to produce, and...?

For whom to produce Signup and view all the answers

What is human capital?

The accumulated skill and knowledge of workers Signup and view all the answers

The Canadian economy is an example of a _____ economic system.

Mixed Signup and view all the answers

In a command economy, productive resources are?

Owned by the state and allocated by the government Signup and view all the answers

Which of the following goals are conflicting?

None of the above Signup and view all the answers

The political economy based on state ownership of productive resources and democratic government is called?

Socialism Signup and view all the answers

Which political economy makes up the extreme right wing of the political spectrum by combining free market economy with a non-democratic or authoritarian form of government?

Fascism Signup and view all the answers

Which of the following is not a major goal of the Canadian economy today?

Nationalization of enterprise Signup and view all the answers

Self-sufficient subsistence is a characteristic of which type of economic system?

Traditional Signup and view all the answers

Study Notes

Basic Economic Principles

The basic economic problem centers on managing limited resources efficiently.
Opportunity cost refers to what is sacrificed when making decisions.

Understanding Economics

Positive economics is grounded in factual reality, distinguishing it from normative statements, which express opinions or recommendations.
Economics is classified as a social science, focusing on the behaviors and interactions of individuals and societies.

Economic Resources

Economic resources encompass natural resources, capital, and human contributions—all are vital for production.
Human capital is defined as the accumulated skills and knowledge possessed by the workforce, influencing productivity.

Production and Opportunity Cost

The production possibility curve (PPC) illustrates the limits of potential output and indicates trade-offs between different goods.
A point inside a bowed-out production possibility frontier suggests resources are underutilized, highlighting unemployment.
A movement along the PPC results from reallocating production resources.
Scarcity is highlighted when resources used for one goal (like building a hospital) are no longer available for another (like constructing a highway).

Economic Systems and Models

The Canadian economy exemplifies a mixed economic system, combining elements of free-market and state intervention.
In a command economy, productive resources are owned and allocated by the government.
Traditional economic systems are characterized by self-sufficient subsistence practices.

Conflict and Goals in Economics

In analyzing potential conflicting goals, no options provided conflict (e.g., passing driving school and test, eating healthy, studying for economics).
The political economy framework based on state ownership and democratic governance is identified as socialism.
Fascism is defined as the extreme right-wing model that merges free market principles with authoritarian governance.

Growth and Development

The law of increasing returns to scale explains that increasing inputs proportionally will yield proportionally greater outputs.
A growing economy can simultaneously produce more of both goods without a clear opportunity cost implication.

Key Economic Questions

Every economy must address three core questions: what to produce, how to produce, and for whom to produce.

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Description

Review the foundational concepts from Chapters 1 and 2 of your Economics course with these flashcards. Covering basic definitions, economic resources, and the principles of positive economics, this quiz will help reinforce your understanding of economic principles. Perfect for exam preparation and quick revisions.