Microeconomics Chapter 1 Flashcards

Questions and Answers

What is scarcity?

The lack of enough resources to satisfy all desired uses (correct)

Sufficient resources to meet all needs

An abundance of resources

The efficient allocation of resources

Which of the following are considered factors of production?

Land

Labor

Capital

All of the above (correct)

What does 'land' refer to in economics?

All natural resources such as land, crude oil, water, air, and minerals.

Define capital in economic terms.

Final goods produced for use in the production of other goods. Signup and view all the answers

Entrepreneurship involves assembling resources to produce new or improved products and technologies.

True Signup and view all the answers

What is economics?

The study of how to allocate scarce resources among competing uses. Signup and view all the answers

What is opportunity cost?

The most desired goods or services that are forgone to obtain something else. Signup and view all the answers

What does the 'guns vs. butter' dilemma refer to?

Balancing national defense with civilian production Signup and view all the answers

What does the production possibilities curve illustrate?

The alternative combinations of final goods and services that could be produced with available resources. Signup and view all the answers

Production possibilities schedules illustrate production choices in a chart or table.

True Signup and view all the answers

How does opportunity cost change along the production possibilities curve?

Opportunity costs increase as more of a particular good is produced. Signup and view all the answers

Law of increasing opportunity cost states that we must give up ever-increasing quantities of other goods and services in order to get more of a particular _____.

good Signup and view all the answers

What does efficiency mean in economics?

Maximum output of a good from the resources used in production. Signup and view all the answers

What does point Y represent in the context of production possibilities?

It is impossible to produce at this point with the available resources and technology. Signup and view all the answers

What does point B represent in the production possibilities curve?

Inefficiency. Signup and view all the answers

What does economic growth refer to?

An increase in output; an expansion of production possibilities. Signup and view all the answers

What are the three core economic questions?

What to produce, how to produce it, for whom to produce. Signup and view all the answers

What was Adam Smith's viewpoint regarding market allocative processes?

The 'invisible hand' determines production and allocation. Signup and view all the answers

What does the market mechanism rely on?

The use of market prices and sales to signal desired outputs. Signup and view all the answers

What is the price signal?

The essential feature of the market mechanism. Signup and view all the answers

What does laissez-faire mean?

The doctrine of 'leave it alone,' advocating nonintervention by government in the market. Signup and view all the answers

What was Karl Marx's viewpoint on free markets?

They tend to concentrate wealth and power in the hands of the few. Signup and view all the answers

What was John Maynard Keynes’s viewpoint on market efficiency?

The market was efficient, but government intervention was necessary when needed. Signup and view all the answers

Which group tends to favor Adam Smith's laissez-faire approach?

Conservatives Signup and view all the answers

What do liberals believe about government intervention?

It is needed to improve market outcomes. Signup and view all the answers

Define a mixed economy.

An economy that uses both market signals and government directives to allocate goods and resources. Signup and view all the answers

What is market failure?

An imperfection in the market mechanism that prevents optimal outcomes. Signup and view all the answers

What is government failure?

Government intervention that fails to improve economic outcomes. Signup and view all the answers

What is macroeconomics?

The study of aggregate economic behavior, of the economy as a whole. Signup and view all the answers

What is microeconomics?

The study of individual behavior in the economy, of the components of the larger economy. Signup and view all the answers

What does ceteris paribus mean?

The assumption of nothing else changing. Signup and view all the answers

Study Notes

Key Economic Concepts

Scarcity: Limited resources cannot satisfy all wants, necessitating choices.
Factors of Production: Four categories include land, labor, capital, and entrepreneurship necessary for production.
Land: Encompasses all natural resources like minerals, oil, water, and air.
Labor: Refers to human skills and abilities essential for producing goods and services.
Capital: Refers to tools and buildings used in the production process, including equipment and structures.
Entrepreneurship: The ability and initiative to combine resources for new or improved products and technologies.

Fundamental Economic Principles

Economics: The science of resource allocation to meet competing desires.
Opportunity Cost: The value of the next best alternative that is forgone when making a choice.
"Guns vs. Butter" Dilemma: The trade-off between military spending and civilian goods.
Production Possibilities: Represents possible combinations of output that can be produced with available resources.
Production Possibilities Schedule and Curve: Visual tools for illustrating production choices and potential outputs.

Production Efficiency and Opportunity Costs

Efficiency: Achieving maximum output from given resources.
Inefficiency: Points on a production curve that represent underutilization of resources.
Law of Increasing Opportunity Cost: Greater sacrifices needed for each additional unit of a particular good produced.

Economic Growth

Economic Growth: Expansion of production capabilities and increased output.
Three Core Economic Questions: Address what to produce, how to produce, and for whom.

Theoretical Perspectives

Adam Smith's Viewpoint: Advocated for minimal government intervention, emphasizing market signals (invisible hand) to guide production.
Market Mechanism: Use of prices and sales to determine outputs and resource allocations.
Laissez-faire: Economic philosophy of limited government involvement in the marketplace.
Karl Marx's Viewpoint: Criticized wealth concentration, advocating for government ownership of production to reduce inequality.
John Maynard Keynes' Viewpoint: Suggested government intervention when markets fail, balancing efficiency with oversight.

Economic Ideologies

Conservatives: Generally support laissez-faire economics and minimal government intervention.
Liberals: Advocate for government roles to improve market outcomes.

Market Dynamics

Mixed Economy: Balances market freedom with government intervention in resource allocation.
Market Failure: Occurs when the market does not achieve optimal outcomes.
Government Failure: Situations where government action fails to enhance economic conditions.

Economic Studies

Macroeconomics: Focuses on aggregate economic behavior and overall economic systems.
Microeconomics: Analyzes individual behavior and components within the larger economy.
Ceteris Paribus: Assumption that other variables remain constant when evaluating economic outcomes.

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Test your knowledge with these flashcards covering key concepts from Chapter 1 of Microeconomics. Learn about scarcity, factors of production, and the various resources involved in economic activities. Perfect for students preparing for exams or wanting to reinforce their understanding of foundational economics terms.