EC201.Quiz1
aggregation
= Total summing up measures across all goods or all people to arrive at one total measure for the whole economy
Definition in context: Relative Scarcity
A major problem faced by developing countries is the relative scarcity of drinkable water as compared to water in general
labor
All PHYSICAL and MENTAL activity devoted to producing goods and services
Definition in context: Allocation
At a local town council, people debated a proposal that would change the allocation of public space for recreational use by demolishing a skating park and building an arboretum.
opportunity cost
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another Change in y / change in x (slope of PPF)
MB>MC
Do it
MB<MC
Don't do it
___________ is the study of how individuals and societies allocate scarce resources among many competing uses and how this decision-making affects the economy at large.
Economics
outside the curve
IMpossible
Macro v Micro: The effect of an extension in unemployment benefits on the unemployment rate in the country
Macroeconomics
Macro v Micro: The effect of an increase in the federal minimum wage on unemployment
Macroeconomics
Macro v Micro: The effect on federal tax revenues of a proposed plan to simplify the tax code with just two rates: 10% on all income up to $100,000 and 25% on all income about $100,000
Macroeconomics
Macro v Micro: The effect of the North American Free Trade Agreement (NAFTA) on output and unemployment in the three countries involved: Canada, Mexico, and the US
Macroeconomics Three countries & two-three markets
Macro v Micro: The effect of a tax credit for purchasing new energy-compliant appliances on the use of electricity
Microeconomics
Macro v Micro: The effect that gasoline taxes have on the amount of miles driven by automobile owners
Microeconomics
Macro v Micro: the effect of a harsh growing season on the price of corn
Microeconomics
Macro v Micro: the effect of an increase in the inflation rate on households' decision to save or spend money
Microeconomics
_______ explores how market prices for an individual good are determined and how they will adjust to a variety of different events, such as weather conditions or even government regulation
Microeconomics
Macro v Micro: The effect of rent controls, or regulated rent prices, on tenants.
Microeconomics dealing with ONE market
ceteris paribus assumption
The assumption that nothing changes except the factor or factors being studied.
entrepreneurial ability
The talent or ability to combine land, labor, and capital to produce goods and services. EA is different from human capital in that it primarily involves assuming RISK and ORGANIZING resources into a productive process rather using resources in production.
capital
The tools, machinery, infrastructure, and knowledge used to produce goods and services. Sometimes divided into "physical" and "human" capital. Physical capital refers to tangible items that are created to increase productivity; human capital refers to the knowledge and skills that people acquire in order to increase productivity.
Definition In Context: 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're engaging in marginal decision making. Similarly, when you decide after studying for three hours that another hour of sleep is more beneficial to you than a fourth hour studying, that's marginal decision making
Definition in context: Scarcity
You have to decide whether you're better of studying for economics exam or going to a movie with friends. Due to scarcity of natural resources, we can't have all the housing and all the forests we may want, since cutting down a tree to build a house means less forest and vice versa.
constant opportunity costs
a characteristic of production such that the opportunity cost associated with increasing the production of one good or service, in terms of another, is constant at every level of production
scarcity
a condition that results from the inability of limited resources to satisfy unlimited wants
production possibilities frontier (PPF)
a graph that shows the possible combinations of two different goods or services that can be produces with fixed resources and technology. This shows the production combinations that are both attainable and efficient. (Think apples v. oranges)
circular flow model
a model that concisely describes how goods, services, resources, and money flow back and forth in an economy.
land
all natural resources used in production; sometimes referred to as "gifts of nature"
Individuals and businesses much choose between the different uses for their available resources. This is called _________ resources and is due to the concept of _______. 1- scarcity; production 2- production; scarcity 3- allocation; scarcity 4- exchanging; opportunity cost
allocating; scarcity
The process of assigning a good, a service, or a resource to one use instead of another describes "____________".
allocation
efficient allocation of resources
allocation of resources in such a way that it is possible to increase the production of one good only by decreasing the production of another
inefficient allocation of resources
allocation of resources in such a way that it is possible to increase the production of one good without decreasing the production of another
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
When resources are fixed, increasing the production of one good causes a __________ in the production of the other.
decrease
Combinations of output along the production possibilities frontier corresponds to: 1- efficient use of resources 2- excessive use of resources 3- under use of resources 4- maximum use of resources
efficient use of resources
Resource: Talent
entrepreneurial ability
product market
firms hire labor households buy products >> revenue back to firms
According to the circular flow diagram, which two groups interact in the resources market? 1- households and firms 2- the federal reserve bank and the U.S. Treasury 3- households and government 4- firms and government
households and firms
The circular flow model shows how: 1- households and firms interact in two key markets: the resource market and the product market 2- households and government interact in two key markets: the resource market and the product market 3- government and firms interact in two key markets: the resource market and the product market. 4- households and consumers interact in two key markets: the resource market and the product market.
households and firms interact in two key markets: the resource market and the product market
resource market
households offering land, labor, capital (owned by people) firms buy household offerings >> income to household
In the circular flow model, __________ and _________ interact in the resource market and the product market
households; firms
Resource: Education
human capital
Definition In Context: marginal benefits and marginal costs
if you've ever supersized your meal at a fast-food restaurant, you determined that the marginal BENEFIT of the additional fries and soft drink was greater than the marginal COST of upgrading your purchase.
resources
inputs/labors of production anything that is used to produce a good or service, whether it is manufactured
All physical and mental activity devoted to producing goods and services is classified under the resource category called _________.
labor
The process of making choices in increments by evaluating the additional, or marginal, benefit against the additional, or marginal, cost of of an action is called: 1- accepted decision making 2- marginal decision making 3- active decision making 4- a logical choice
marginal decision making
inside the curve
possible! INefficient
on the curve
production possibilities frontier (PPF) max between two factors efficient
When resources are ________, increasing the production of one good causes a decrease in the production of the other.
scarce
A strong economic model allows us to analyze the economic events of the world by 1- employing the resources of the federal government 2- simplifying a very complex economic world 3- replication the economic world exactly 4- ignoring the ceteris paribus assumption
simplifying a very complex economic world
Different Opportunities equals...
specialization and trade
marginal cost
the additional COST associated with 1 more unit of an activity
marginal benefit
the additional or EXTRA BENEFIT associated with 1 more unit of an activity
relative scarcity
the comparison of the scarcity of one good, service, or resource to that of another
self-interest
the idea that people choose to do the things that interest them
optimization
the idea that people make choices in order to maximize the overall benefit, or utility, of an action subject to its cost; people will engage in an activity as long as the marginal BENEFIT of an activity is GREATER than or equal to its marginal COST.
There is no incentive to either increase or decrease the level of the activity performed when: 1- the total benefit equals the marginal cost 2- the total benefit equals the total cost 3- the marginal benefit equals the marginal cost 4- the marginal benefit equals the total cost
the marginal benefit equals the marginal cost
allocation
the process of assigning a good, service, or resource to one use instead of another
marginal decision making
the process of making choices in increments by evaluating the additional, or marginal, cost of an action
Macroeconomics
the study of the economy at the large-scale level, examining total output, the price level, and other aggregate measures of the economy.
Microeconomics
the study of the economy at the small-scale level, examining individuals and specific markets
The marginal benefit of an activity can be found by calculating the change in: 1- total costs of the level of the activity 2- total benefits as the level of the activity increases by one unit 3- total benefits of the level of the activity 4- total costs as the level of the activity increases by one unit
total benefits as the level of the activity increases by one unit