Microeconomics study

Scarcity

A common economic situation where an economy's resources are insufficient to meet the existing wants and must be used judiciously is referred to as ___

Scarcity

A major problem faced by developing countries is the relative ____ of drinkable water as compared to water in general

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

If the marginal benefit of an activity exceeds the marginal cost of the activity we should

Continue to increase output until the marginal benefit equals marginal cost

Macroeconomics

Deals with large-scale issues of an economy, such as total output, average price levels(and inflation), and unemployment

When resources are fixed, increasing the production of one good causes a(n) (increase/decrease) in the production of the other.

Decrease

When the producer of a good or service has a lower opportunity cost than other producers, that producer has an advantage in the market because:

He or she will be able to sell at a lower price than other producers

Which of the following help measure the quality of a good economic model?

How well it reflects reality, Whether it gives us insights that can be used in the real world

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

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

Firms will be willing and able to produce more output only when prices rise, because the _____ cost of production is rising.

Opportunity

Individuals and countries specialize because of differences in:

Opportunity costs

When decision maximizes overall benefit, it is called

Optimization

Self interest, marginal decisions, and optimization all form the basis of _______ decision making

Rational

_____ in trade causes individuals and nations to become interdependent.

Specialization

Relative Scarcity

The comparison of the scarcity of one good, service, or resource to that of another.

Decreasing marginal benefit describes:

The inverse relationship between the marginal benefit associated with the use of a good or service and the quantity consumed

Allocation

The process of assigning a good, service, or resource to one use instead of another

A production possibilities frontier that illustrates a 1-for-1 trade off between goods is drawn as:

a straight, downward-sloping line

comparative advantage refers to:

being the lowest relative opportunity cost producer of a good

The more of a good or a service that is consumed in a given period of time, the lower the marginal ____ that is associated with each additional unit

benefit

Combinations lying ____ the production possibilities frontier are impossible to produce with the current resources and technology.

beyond

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) _____ 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

______ advantage is the foundation of establishing the benefits of trade.

comparative

gains from trade can be measured by:

comparing the units of goods traded

When production is characterized by ____ opportunity costs, the resulting production possibilities frontier will be a straight line.

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

As the amount of an activity increases, its marginal benefit

decreases

The opportunity cost of producing a good for one producer may be different from that of another because of:

differences in available resources and technology

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:

efficient

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.

Funds that firms pay for resources are costs to firms but they represent which of the following type of flow to households?

income

As the amount of an activity increases, its marginal cost:

increases

On the supply side of the market, when the price of a good increases, the quantity supplied of the good:

increases

When resources are allocated in such a way that it is possible to increase the production of one good without decreasing the production of another, then the allocation of resources is:

inefficient

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

An economy is better off when it stops producing output at the point where

marginal benefit = marginal cost

An economy should continue producing a good or a service so long as:

marginal benefit exceeds marginal cost

The additional cost associated with one more unit of an activity is the

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

Each row of the production possibilities schedule illustrates the _____ amount of a good or a service that may be produced, given the production of the other.

max

Combinations outside of the production possibilities frontier are:

not currently possible to produce

If the terms of trade are the same as your _____ 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. This is called ____ cost

opportunity

The producer with the lowest relative _____ cost has a comparative advantage and should specialize in the production of that good.

opportunity

____ cost is most plainly visible when spending more money on one thing means that less money can be spent on another thing.

opportunity

Consider a production possibilities frontier (PPF) with Good X on the horizontal axis and Good Y on the vertical axis. The slope of the PPF tells us the _____ of producing one additional unit of Good X.

opportunity cost

The value of the next-best forgone alternative is the

opportunity cost

When the marginal benefit equals the marginal cost, we reach a(n)

optimal level of output

The line (or curve) that represents the combinations of the two goods produced on the production possibilities frontier is a boundary between output levels that are ____ and output levels that are unattainable.

possible

A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a(n)

production possibilities frontier

The production possibilities frontier, or curve, is a graphical representation of the

production possibilities theory

Self-interest, marginal decision making, and optimization forms the basics for:

rational decision making

Physical capital

refers to tangible items that are created to increase productivity

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 ____ to the production of two different goods or services

resources

If you decide to produce at a level where marginal cost exceeds marginal benefit (MC > MB), there is a waste of _____ that could be better used somewhere else

resources

_________ is/are also called factors of production since they are transformed into output during the production process.

resources

The opportunity cost of producing a good for one producer may be different from that of another because of differences in available ______ and ______

resources and technology

A strong economic model allows us to analyze the economic events of the world by:

simplifying a very complex economic world

The ______ 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

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

A potential risk of specialization is:

susceptibility to market fluctuations

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

According to the law of supply, as the price of good, service, or resource rises:

the quantity supplied will increase - and vice versa - all else held constant.

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.

Whether or not a good or service is traded depends largely on the terms of

trade

A society's ability to produced needed goods and services is permanently reduced if it

uses resources too quickly