Introductory Economics Concepts

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Questions and Answers

Which concept BEST explains why individuals must make choices?

Lack of economic models
Normative economics
Scarcity (correct)
Unlimited resources

What does the term 'ceteris paribus' mean in the context of economic modeling?

All other things held constant (correct)
Some things are more equal than others
All things must change
The situation is hopeless

Which of the following is an example of a positive economic statement?

The government should increase taxes to fund education.
Increased government spending leads to higher inflation. (correct)
Everyone is entitled to basic healthcare.
The minimum wage should be higher.

Choosing to study for an economics exam instead of going to a movie BEST illustrates which economic concept?

Opportunity cost (B) Signup and view all the answers

A company is considering whether to produce one more unit of output. Which economic principle is MOST relevant to this decision?

Thinking at the margin (C) Signup and view all the answers

Why does specialization and trade MOSTLY benefit all participants?

It allows for consumption beyond individual production possibilities. (D) Signup and view all the answers

Which factor of production includes machinery and equipment used to produce goods and services?

Capital (D) Signup and view all the answers

In a command economy, who makes the MOST key economic decisions?

The government (A) Signup and view all the answers

According to the circular flow model, what do households provide to firms?

Factors of production (A) Signup and view all the answers

What does a point INSIDE the Production Possibilities Frontier (PPF) represent?

An inefficient allocation of resources (A) Signup and view all the answers

Why is the Production Possibilities Frontier (PPF) typically bowed outward?

Due to increasing opportunity costs (D) Signup and view all the answers

What causes the Production Possibilities Frontier (PPF) to shift outward?

A technological advancement (A) Signup and view all the answers

What is absolute advantage?

The ability to produce a good using fewer inputs (C) Signup and view all the answers

What principle should countries use as the basis for trade?

Comparative advantage (B) Signup and view all the answers

How does trade based on comparative advantage affect a country's consumption possibilities?

It allows consumption beyond its own PPF. (D) Signup and view all the answers

Which of the following typically leads to inflation?

The government printing too much money (C) Signup and view all the answers

What BEST describes a mixed economy?

An economy that combines elements of market and command economies (A) Signup and view all the answers

What is the role of entrepreneurship in the factors of production?

To organize other factors of production and take risks (B) Signup and view all the answers

If a country can produce more of a good than another country using the same amount of resources, it has a(n):

Absolute advantage (A) Signup and view all the answers

What BEST describes 'thinking at the margin'?

Evaluating the cost and benefit of one more unit (A) Signup and view all the answers

Flashcards

Economics

The study of how people make decisions with limited resources.

Scarcity

Limited resources relative to unlimited wants.