Mac - Fundamentals
Economists use the phrase _____ to refer to the positive gains enjoyed by both buyers and sellers when they trade.
"trade creates wealth"
The law of blank opportunity cost says that because some resources are better suited to producing one good or service than another, as the production of a good or a service increases, the blank cost of each additional unit rises.
Blank 1: increasing, increased, or increase Blank 2: opportunity
A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a(n) blank.
Blank 1: production Blank 2: possibilities or possibility Blank 3: frontier, curve, or schedule
The circular flow model shows how households and firms interact in two key markets: the blank market and the blank market.
Blank 1: resource, resources, or factor Blank 2: product
Using these production graphs, in which product should Julia specialize?
Coffee
blank advantage is the foundation of establishing the benefits of trade.
Comparative
Someone who is self-interested only performs actions for his or her own benefit and not for the benefit of others.
False
Martin has given himself an entertainment budget of $5 per week. He has decided that each week he will spend that $5 by either attending a matinee movie at his local theater or downloading five songs by one of his favorite artists. What is the non-monetary opportunity cost of seeing a movie this week?
Five songs
According to the circular flow diagram, which two groups interact in the resources market?
Households and firms
According to the circular flow, which two groups interact with each other in the product market?
Households and firms
blank examines the entire economy of a state - a country - or even the world.
Macroeconomics
blank typically deals with individual households and markets - such as the market for gasoline.
Microeconomics
If Alex engages in a mutually beneficial trade with another producer, where would his consumption point lie?
Outside the PPF
_________ is/are also called factors of production since they are transformed into output during the production process.
Resources
_____ in trade causes individuals and nations to become interdependent.
Specialization
"I love ice cream. But I've eaten so much ice cream today, I can't possible eat another cup."
The marginal benefit of eating ice cream is falling.
Clara can spend her afternoon doing one of three things: She can study economics, plant a sapling in her garden, or wash her car. Suppose she values spending time in the garden most; next her time washing the car; and her time studying economics the least. What is the opportunity cost of planting a garden?
Washing her car
Although points on the production possibilities frontier represent the different combinations of output, ultimately what they show is how we allocate our scarce to the production of two different goods or services.
Whether it gives us insights that can be used in the real world How well it reflects reality
Because the world is characterized by scarcity, people must choose between different uses for the resources at their disposal. In economics, we refer to this as:
allocating resources.
At a local town council, people debated a proposal that would change the use of public space for recreational use by demolishing a skating park and building an arboretum. This is known as the problem of:
allocating scarce resources.
The more of a good or a service that is consumed in a given period of time, the lower the marginal blank that is associated with each additional unit.
benefit
For an entire economy, the production possibilities frontier is going to be:
bowed out because we have different resources with different opportunity costs.
A producer has a(n) blank advantage in the production of a good or a service if his or her relative opportunity cost of production is lower than the opportunity cost of other producers.
comparative
As long as there are differences in opportunity costs, there are blank advantages and there will be potential for trade to make both parties better off.
comparative
If you are relatively better at something, then you are said to have a(n) _____ advantage in that activity.
comparative
Specialization in a particular good is based on advantage on blank the good.
comparative
When production is characterized by blank opportunity costs, the resulting production possibilities frontier will be a straight line.
constant
The simple model of production assumes that the opportunity cost of production is:
constant.
When you see a production possibilities frontier (PPF) drawn as a straight line, the opportunity cost of one good or service (in terms of units of the other good or service that must be given up) is assumed to be:
constant.
If the marginal benefit of an activity exceeds the marginal cost of the activity (MB > MC), we should
continue to increase output until MB = MC.
In the circular flow model, households and interact in the resource market and the product market.
corporations
As the amount of an activity increases, its marginal benefit:
decreases.
Specialization causes individuals and nations to rely on one another and increases the:
degree of interdependence between them.
On a production possibilities frontier (PPF) with Good X on the horizontal axis and Good Y on the vertical axis, we can say that the slope of the PPF (in absolute value) equals the opportunity cost of producing Good X with respect to the production of Good Y. This is true because the slope:
describes the trade-off resulting from the production of Good X in terms of Good Y.
The quality of a(n) blank model can be measured by how well it reflects reality and whether it gives us insights that can be used in the real world.
economic
blank is the study of how individuals and institutions make decisions in a world of scarce resources
economics
When resources are allocated in such a way that it is possible to increase the production of one good only by decreasing the production of another, then the allocation of resources is said to be blank.
efficient
In economics - resources can also be called
factors of production
In the circular flow model, blank must buy resources in order to produce the output they will sell to households.
firms
In the two sector circular flow model, ________ must buy resources from _________ in order to produce the output they will sell to households.
firms; households
inputs because they are transformed into output in the production process.
flows of goods and services resources and money.
The benefit - or wealth - that accrues to a buyer or a seller as a result of trading one good - service - or resource for another is the:
gains from trade.
If the price is too blank, producers will be eager to sell, but buyers will not be willing or able to buy.
high
In the circular flow model, _____ can obtain the income they need to buy the products they want to consume only by selling their resources.
households
The two parties involved in the simple circular flow model are:
households and businesses.
The circular flow model shows how:
households and firms interact in two key markets.
In the simple circular flow model, firms will buy resources from and sell products to:
households.
The harm in specializing is that:
if the demand for the good or service you produce decreases, its price and your income will decrease too.
You are wasting resources that would be better spent elsewhere:
if you continue producing when marginal benefit is less than marginal cost.
In the real world, the opportunity cost of production as production increases.
increases
Specialization causes individuals and nations to rely on one another and:
increases the degree of interdependence among them.
As the amount of an activity increases, its marginal cost:
increases.
On a production possibilities frontier (PPF), if you are able to increase the production of both goods at the same time then, initially, resources were allocated blank.
inefficiently
Resources are also called:
inputs because they are transformed into output in the production process.
All natural resources used in production are classified under the resource category called blank.
land
Suppose a farmer has three kinds of land for growing peaches; good - better - and best. As the farmer increases production - she will use the best land first - and costs will be low. At some point - she will run out of the best land and will have to start using the better land - and costs will be a little higher. This describes the:
law of increasing opportunity cost.
Wind energy is relatively (less/more) scarce than coal.
less
Optimization behavior implies that if the marginal benefit of an activity is ______ ______ its marginal cost, you should not engage in that activity.
less than
For two parties to be willing to trade, the terms of trade must be:
less than the buyer's opportunity cost but greater than the seller's opportunity cost.
When the opportunity cost associated with increasing the production of one good or service in terms of another is constant at every level of production, then the production possibility frontier is:
linear
The producer with the blank relative opportunity cost has a comparative advantage and should specialize in the production of that good.
lowest
The additional benefit associated with one more unit of an activity is the _____ benefit.
marginal
The additional cost associated with one more unit of an activity is the blank (one word) cost.
marginal
An economy should continue producing a good or a service so long as:
marginal benefit exceeds marginal cost.
When you decide - after studying for three hours - that another hour of sleep is more beneficial to you than a fourth hour of studying, you are engaging in:
marginal decision making.
When you decide to turn off the bedroom light on your way to the kitchen so that you can save a little money on your electric bill, you are engaging in:
marginal decision making.
Focusing production entirely on one good or service leaves you susceptible to changes in the blank (one word).
market
Each row of the production possibilities schedule illustrates the blank amount of a good or a service that may be produced, given the production of the other.
maximum
The law of increasing opportunity costs exists because
not all resources are well-suited for all production.
Combinations outside of the production possibilities frontier are:
not currently possible to produce.
If the terms of trade are the same as your blank cost, you will receive no gains from the trade.
opportunity
Spending more money on one thing means that you have less money to spend on something else. This is called ______ cost.
opportunity
The blank cost of producing a good or a service can be found by solving for the cost of one good in terms of another.
opportunity
The terms of trade that are beneficial to both parties are prices that lie between both the parties' blank costs.
opportunity
The value of the next-best forgone alternative is the blank cost.
opportunity
blank cost is most plainly visible when spending more money on one thing as it means that less money can be spent on another th
opportunity
blank cost is most plainly visible when spending more money on one thing means that less money can be spent on another thing.
opportunity
When the marginal benefit equals the marginal cost, that stable level is referred to as an blank level.
optimal
blank is the idea that people make choices to maximize the overall benefit - or utility - of an action subject to its cost.
optimization
When a decision maximizes overall benefit, it is called:
optimization.
Money spent by a firm on machinery that is designed to improve future productivity is called:
physical capital.
Combinations inside the production possibilities frontier are:
possible but inefficient.
When people trade - producers can achieve something they can't without trade. Thus - only with trade is it
possible to operate outside the production possibilities frontier.
Comparative advantage refers to the ability to:
produce a good or service at a lower opportunity cost than others.
In the circular flow model, the two markets are the factor market and the:
product market.
Each row of the tabular __________ illustrates the maximum amount of a good or a service that can be produced given the production of the other.
production possibilities schedule
A table that shows the possible combinations of two different goods or services that can be produced with fixed resources and technology is the:
production possibilities schedule.
The production possibilities frontier, or curve, is a graphical representation of the
production possibilities schedule.
The function of firms in the circular flow model is to _____ resources and _____ products.
purchase; sell
Self interest, marginal decisions, and optimization all form the basis of blank decision making.
rational
Self interest, marginal decisions, and optimization all form the basis of decision making.
rational
Self-interest, marginal decision making, and optimization form the basis for:
rational decision making.
The comparison of the scarcity of one good, service, or resource to that of another is called "blank scarcity."
relative
According to the circular flow diagram, households and firms interact in the ______ and the ______.
resource market; product market
Although points on the production possibilities frontier represent the different combinations of output, ultimately what they show is how we allocate our scarce blank to the production of two different goods or services.
resources
Because the world is characterized by scarcity, people must allocate the limited blank at their disposal among many competing uses.
resources
Every person's and every economy's standard of living relies on the effective use of blank.
resources
In the circular flow model, firms can produce the output they sell to households only by buying blank from households.
resources
In the circular flow model, households can obtain the income they need to buy the products they want to consume only by selling their blank - also known as factors of production.
resources
The points on the production possibilities frontier show how we allocate our scarce blank to the production of two different goods or services.
resources
Because resources are blank (one word), they must be allocated between competing uses.
scarce
Economics is the study of how individuals and societies allocate blank resources among many competing uses.
scarce
Economics is the study of how individuals and societies allocate:
scarce resources among many competing users.
A major problem faced by developing countries is the relative ______ of drinkable water as compared to water in general.
scarcity
Due to the ______ of natural resources, we cannot have all the housing and all the forests we may want.
scarcity
Economics studies how individuals and businesses make decisions in a world of blank resources
scarcity
blank-interest is the idea that people choose to do the things that interest them.
self
A strong economic model allows us to analyze the economic events of the world by:
simplifying a very complex economic world.
The blank of the production possibilities frontier equals the trade-off of the production of one good or service in terms of the other.
slope
The opportunity cost of producing a good or a service can be found by:
solving for the cost of one good in terms of another.
For an entire economy, the production possibilities frontier is going to be bowed out because:
some resources are better suited for producing some goods or services than others.
In the real world, the opportunity cost increases as production increases, because:
some resources are better suited for producing some goods or services than others.
Because of differences in opportunity costs, individuals and businesses
specialize in the production of the good for which they wield a comparative advantage.
Marginal benefit is:
the additional benefit associated with one more unit of an activity.
Marginal cost is:
the additional cost associated with one more unit of an activity.
Decreasing marginal benefit describes:
the inverse relationship between the marginal benefit associated with the use of a good or a service and the quantity consumed.
The optimal level of economic activity occurs when:
the marginal benefit equals the marginal cost.
Terms of trade refers to
the price of one good or service in terms of another.
Whether a good or a service will be traded internationally depends largely on:
the terms associated with the trade.
Opportunity cost is defined as:
the value of the opportunity that you give up when you choose one activity instead of another.
Opportunity cost is:
the value of the opportunity that you give up when you choose one activity instead of another.
The marginal cost of an activity can be found by calculating the change in:
total costs as the level of the activity increases by one unit.
The term "scarcity" describes the fact that people's ______ wants cannot be completely satisfied with ______ resources.
unlimited; limited
A society's ability to produced needed goods and services is permanently reduced if it
uses resources too quickly.
Individuals and countries specialize because the opportunity cost of producing goods and services:
varies.
If you continue producing when marginal benefit is less than marginal cost, you are:
wasting resources that would be better spent elsewhere.
Combinations lying blank the production possibilities frontier are possible but inefficient with the current resources and technology.
within
What is the opportunity cost of Product B?
½ Product A