Economics Test 1 Review
Law of Increasing Costs
Law that states that as we shift factors of production from making one good or service to another, the cost of producing the second item increases
Scarcity
Limited quantities of resources to meet unlimited needs or desires
A corporation is a virtual what?
Person
Capital
Resources that are made by humans and used to create other goods and services
What are factors of production?
Resources used to make all goods and services
Corporation
A business organization owned by the holders of its stock.
What is a partnership?
A business owned by two or more partners
Virtual Person
A corporation
Productions Possibility Curve
A curve that shows alternative ways to use an economy's resources
Which of the following will cause a Production Possibility Curve to shift outward?
Technology
Which business organization has stock holders?
Corporation
What does a Production Possibilities Curve show?
Different ways of using resources
Why is it more difficult to get a cab when it is raining?
Everyone wants to be dry
How does an economist define being "efficient"?
Getting the most use of our scarce resources
What are capital goods?
Goods used to make other goods
Utility Maximization
When a person compares two or more alternatives and chooses that alternative with the lowest opportunity cost.
Know the opportunity cost model
scarcity requires choice which involves opportunity cost analysis involves utility maximization
Opportunity Cost
the benefits you could have received by taking an alternative action.
Mr. Britten bought a cheeseburger for $5. What is a possible opportunity cost of that decision?
The hot dog I could have eaten
Capitalization
The product of the number of outstanding shares multiplied by the share price
Factors of Production
The resources used to make all goods and services
Why is it important to know the value of a company's capitalization?
To know the company's stock price
Why did Ferris choose to skip school?
To maximize his utilities
If your economy is operating at a point A, then you are ____ your resources?
Underutilizing
Underutilization
Using fewer resources than an economy is capable of using
Efficiency
Using resources in such a way as to maximize the production of goods and services
Because all goods are scarce, what must occur?
Choice
What is the reason for the "bowed out" shape of the PPC curve?
Due to increasing opportunity cost
