Econ 2302_Module 1_Readings Fundamentals

Economists use the phrase _____ to refer to the positive gains enjoyed by both buyers and sellers when they trade.

"trade creates wealth"

A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a(n) ( ) ( ) frontier. (Use one word for each blank.)

Blank 1: production Blank 2: possibilities or possibility

Select all that apply 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

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

Opportunity

Evaluate the following statement: "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.

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

a straight, downward-sloping line

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.

Individuals and businesses must choose between the different uses for their available resources. This is called ______ resources and is due to the concept of ______.

allocating; scarcity

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. (Enter one word in the blank.)

comparative

If you are relatively better at something, then you are said to have a(n) _____ advantage in that activity.

comparative

As long as there are differences in opportunity costs, there are ( ) advantages and there will be potential for trade to make both parties better off.

comparative or comparitive

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.

The wealth - or additional well-being - created by trade -

does not have to be monetary.

The quality of a(n) ( ) 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 or economics

The circular flow model shows how:

households and firms interact in two key markets.

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

increases.

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.

As long as there are differences in ( ) costs, there are comparative advantages and there will be potential for trade to make both parties better off.

opportunity

The value of the next-best forgone alternative is the ( ) cost. (Enter one word in the blank.)

opportunity

Individuals and countries specialize because of differences in:

opportunity costs.

According to the circular flow diagram, when a firm receives money for a good or service it sold to a household, the interaction occurs in the ( ) (one word) market.

product

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

production possibilities schedule.

Self interest, marginal decisions, and optimization all form the basis of ( ) decision making. (Enter one word in the blank.)

rational

Self-interest, marginal decision making, and optimization form the basis for:

rational decision making.

Economics is the study of how individuals and societies allocate:

scarce resources among many competing users.

Economics is the study of how individuals and societies allocate ( ) resources among many competing uses. (Use one word for the blank.)

scarce, limited, or finite

Due to the ______ of natural resources, we cannot have all the housing and all the forests we may want. (Use one word for the blank.)

scarcity

Because of differences in opportunity costs, individuals and businesses

specialize in the production of the good for which they wield a comparative advantage.

The term "scarcity" describes the fact that people's ______ wants cannot be completely satisfied with ______ resources.

unlimited; limited

Individuals and countries specialize because the opportunity cost of producing goods and services:

varies.