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What term describes the imbalance between our wants and the means to satisfy those wants?
What term describes the imbalance between our wants and the means to satisfy those wants?
A resource is considered free if its quantity available to society is less than the amount people desire at zero price.
A resource is considered free if its quantity available to society is less than the amount people desire at zero price.
False
What is the reward for labor called?
What is the reward for labor called?
wage
The payment for land as an economic resource is called ______.
The payment for land as an economic resource is called ______.
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Match the following economic resources with their rewards:
Match the following economic resources with their rewards:
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What are the two fundamental facts that lay the foundation for Economics?
What are the two fundamental facts that lay the foundation for Economics?
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The goal of consumers is to produce goods and services for profit.
The goal of consumers is to produce goods and services for profit.
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What does the term 'oikonomia' refer to in the context of economics?
What does the term 'oikonomia' refer to in the context of economics?
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Economics studies the allocation of scarce resources in the production, consumption, and distribution of goods and services to attain the maximum fulfillment of society's material _____
Economics studies the allocation of scarce resources in the production, consumption, and distribution of goods and services to attain the maximum fulfillment of society's material _____
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Match the following goals to their corresponding entities:
Match the following goals to their corresponding entities:
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What are the two major branches of economics?
What are the two major branches of economics?
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Economic resources include anything natural or man-made used in the production of goods and services.
Economic resources include anything natural or man-made used in the production of goods and services.
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What does economics focus on regarding resource allocation?
What does economics focus on regarding resource allocation?
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What is the main reward for an entrepreneur?
What is the main reward for an entrepreneur?
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Scarcity and shortage refer to the same concept in economics.
Scarcity and shortage refer to the same concept in economics.
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What is opportunity cost?
What is opportunity cost?
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A good is considered ___ if the amount available to society is less than the amount people desire at zero price.
A good is considered ___ if the amount available to society is less than the amount people desire at zero price.
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Match the following terms with their descriptions:
Match the following terms with their descriptions:
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Which of the following is NOT an assumption to draw the Production Possibility Frontier (PPF)?
Which of the following is NOT an assumption to draw the Production Possibility Frontier (PPF)?
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All resources must be utilized for an economy to reach its Production Possibility Frontier.
All resources must be utilized for an economy to reach its Production Possibility Frontier.
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What does PPF stand for?
What does PPF stand for?
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What is the maximum number of cars the economy can produce if all resources are allocated to the car industry?
What is the maximum number of cars the economy can produce if all resources are allocated to the car industry?
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Producing at any point inside the production possibilities frontier is considered efficient.
Producing at any point inside the production possibilities frontier is considered efficient.
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What does the production possibilities frontier illustrate in terms of trade-offs?
What does the production possibilities frontier illustrate in terms of trade-offs?
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The opportunity cost of a commodity is the amount of the next best alternative that must be sacrificed to obtain one more unit of the ______.
The opportunity cost of a commodity is the amount of the next best alternative that must be sacrificed to obtain one more unit of the ______.
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Match the following output scenarios with their descriptions:
Match the following output scenarios with their descriptions:
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When society moves from point A to point C, how many cars are sacrificed to obtain additional computers?
When society moves from point A to point C, how many cars are sacrificed to obtain additional computers?
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Points on the production possibilities frontier (PPF) represent unattainable production levels.
Points on the production possibilities frontier (PPF) represent unattainable production levels.
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Describe what point D represents in relation to resource allocation.
Describe what point D represents in relation to resource allocation.
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What does the opportunity cost represent?
What does the opportunity cost represent?
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According to the law of increasing opportunity cost, the opportunity cost decreases as more units of a good are produced.
According to the law of increasing opportunity cost, the opportunity cost decreases as more units of a good are produced.
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What are two causes of economic growth?
What are two causes of economic growth?
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A significant natural disaster such as a ______ can lead to the contraction of the production possibilities frontier.
A significant natural disaster such as a ______ can lead to the contraction of the production possibilities frontier.
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What happens to the production possibilities frontier when technological advances occur?
What happens to the production possibilities frontier when technological advances occur?
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Match the following economic concepts with their definitions:
Match the following economic concepts with their definitions:
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Asymmetrical technological changes benefit only one sector of the economy.
Asymmetrical technological changes benefit only one sector of the economy.
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Name one method that can determine the production technique or input to use.
Name one method that can determine the production technique or input to use.
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What is the primary role of households in the economy?
What is the primary role of households in the economy?
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Firms have no role in buying economic resources.
Firms have no role in buying economic resources.
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Name the two main types of markets in which economic agents interact.
Name the two main types of markets in which economic agents interact.
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In the circular flow model, firms provide ______ in exchange for resources from households.
In the circular flow model, firms provide ______ in exchange for resources from households.
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Which of the following is included in the three sector circular flow model?
Which of the following is included in the three sector circular flow model?
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The circular flow model only represents the flow of goods, not money.
The circular flow model only represents the flow of goods, not money.
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What do firms sell in the economy?
What do firms sell in the economy?
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Study Notes
Introduction to Economics
- Economics originates from the ancient Greek word "oikonomia."
- "Oikos" means house, and "nomos" means rule or custom.
- "Oikonomia" thus signifies the management of a household.
- Two fundamental economic facts are:
- Society's material wants are unlimited.
- Economic resources are limited (scarce) in supply.
- Society's wants encompass consumer, business, and government desires for resources fulfilling their goals.
- Consumers seek maximum satisfaction.
- Businesses aim for profit through goods and service production.
- Governments strive to meet societal needs.
- Resources include natural and manufactured items used in goods and service production.
- Economic resources are scarce.
Chapter One: Fundamentals of Economics
- Economics studies the allocation of scarce resources in production, consumption, and distribution to maximize societal needs.
- Economics aims to do the best with available resources.
Definition and Nature of Economics
- Society's wants are numerous and constantly developing.
- Limited resources cause an imbalance between societal wants and availability.
- Scarcity necessitates choices and trade-offs.
The Scope of Economics
- Economics is divided into two major branches:
- Microeconomics
- Macroeconomics
- Microeconomics examines individual economic units (consumers, producers, businesses).
- Microeconomics explores how individual commodity markets operate.
- Macroeconomics examines the economy as a whole, considering interconnected economic units and aggregates.
- Macroeconomics analyzes broad economic measures like national output (GDP).
Scarcity and Choice
- Scarcity refers to the limited nature of economic resources.
- Scarcity necessitates choice between competing wants.
- Economists classify resources as:
- Free: Sufficient resources exceed societal wants at zero price.
- Economic: Limited resources in supply. Society desires more than is available at zero price.
- Economic resources are categorized as:
- Labor: Physical and mental human effort.
- Land: Natural resources.
- Capital: Man-made resources used to produce goods/services.
- Entrepreneurship: Human talent in organizing production factors.
Production Possibility Frontier (PPF)
- PPF is a graphical representation of possible output combinations.
- PPF assumes:
- Efficient resource use
- Fixed resources
- Two products
- Fixed technology
- Points on the PPF are attainable and efficient.
- Points inside the PPF are attainable but not efficient.
- Points outside the PPF are unattainable given current resources/technology.
Opportunity Cost
- Opportunity cost represents the value of the next-best alternative.
- Opportunity costs increase as more of a good is produced, due to resource allocation.
- Moving along the PPF means producing more of one good/service results in less of another given fixed resources.
Economic Growth
- Economic growth results in an outward shift of the PPF.
- Economic growth arises from capital accumulation and technological advances.
- Factors such as drought, floods, and earthquakes can cause a PPF contraction.
Basic Economic Questions and Alternative Economic Systems
- The basic economic questions are:
- What to produce? Types and quantities.
- How to produce? Methods and resource allocation.
- For whom to produce? Distribution of goods/services.
- Economic systems try to answer these questions:
- Market economy
- Command economy
- Mixed economy.
Market Economy
- Characterized by private resource ownership and market coordination.
- Participants act in self-interest, maximizing profit/satisfaction.
- Markets facilitate resource allocation.
Command Economy
- Central authority plans production.
- Government controls resource allocation, output distribution.
- Production decisions are based on government directives.
Mixed Economy
- Combines elements of market and command systems.
Decision-Making Units and Circular Flow
- The three primary decision-making units in a closed economy are:
- Households: Supply resources (labor, capital, land, entrepreneurship) and demand goods/services.
- Firms: Use resources to produce and sell goods/services.
- Government: Collect taxes, provide public services.
- Economic activity is represented by circular flow models (two-sector model, three-sector model).
- The circular flow of economic activity depicts the exchange of goods, services and resources/payments among these actors.
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Description
This quiz covers the foundational concepts of economics as introduced in Chapter One. Explore the origins of the term 'economics' and understand the relationship between society's unlimited wants and the limited resources available. Test your knowledge on how economic principles apply to consumers, businesses, and governments.
