econ
in economics, choices must be made because we live in a world of
scarcity
which of the following is not a factor of production
$1,000 in cash
Microeconomics is the study of
how households and firms make choices
you have an absolute advantage whenever you
can produce more of something than others with the same resources
An "inquiry into the nature and causes of the wealth of nations" published in 1776 was written by
Adam Smith
the ____ demonstrates the roles played by households and firms in the market system
circular flow model
the relationship between consumer spending and disposable personal income is
a direct relationship
An inward shift of a nations production possibilites frontier can occur due to
a natural disaster like a hurricane or bad earthquake
the Great Depression of the 1930s with a large number of workers and factories unemployed would be represented in a production possibilites frontier graph by:
a point inside the frontier
when production reflects consumer preferences, _____ occurs
allocative efficiency
The revenue received from the sale of ____ of a product is a marginal benefit to the firm.
an additional unit
economists assume that individuals
are rational and respond to incentives
comparative advantage means the ability to produce a good or service
at a lower opportunity cost than any other producer
which is NOT a factor of production?
dollars
in economics, the term equity means
economic benefits are distributed fairly
all of the following are critical functions of the goverment in faciliating the operation of a market conomy except
ensuring an equal distribution of income to all citizens
the natural resources used in production are made available in the
factor market
productive efficiency is achieved when
firms produce goods and serivices at the lowest cost
in the circular flow model, producers
hire resources sold by households in the factor market
How are the fundamental economic questions answered in a market economy?
households, and firms interact in markets to decide the answers to these questions
the production possibilities frontier model shows that:
if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good
Which of the following is a postive economic statement?
if the price of iphones falls, a larger quantity of iphones will be purchased
in a production possibilites frontier model, a point ____ the frontier is productively inefficent
inside
in economics, the term ___ means "additional" or "extra"
marginal
Economists reason that the optimal decision is to continue any activity up to the point where the
marginal benefit equals the marginal cost
The term ____ in economics refers to a group of buyers and sellers of a product and the arrangment by which they come together to trade.
market
the production possibilities frontier shows the ____ combination of two products that may be produced in a particular time period with available resources
maximum attainable
an economic _____ is a simplified version of some aspect of economic life used to analyze an economic issue
model
which of the following statements about the economic decisions consumers, firms, and the government have to make is false?
only indivualds face scarcity, firms and the government do not
The higher valued alternative that must be given up to engage in an acitvity is the deffinition of
opporunity cost
Which of the following is a normative economic statement?
pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable
when you purchase a new pair of jeans you do so in the
product market
which of the following statements is true about profit?
profit is the difference between revenue and cost
households ____ final goods and services in the ____ market
purchase; product
Which of the following statements is true about scarcity?
scarcity refers to the situation in which unlimited wants exceed limited resources
which of the following is an example of an activity undertaken by an entrepreneur?
starting your own pet sitting business
By defintion, economics is the study of?
the choices people make to attain their goals, given their scarce resources
macroeconmics is the study of
the economy as a whole
Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?
the government
how are the fundamental economic decisions determined in north korea
the government decides because north korea is a centrally planned economy
Adam Smith`s invincible hand refers to
the process by which individuals acting in their own self-interest bring about a market outcome that benefits society as a whole
suppose when the price of laptops fall, college students buy more laptops. This implies that:
there is a negative relationship between laptop price and qantities purchased by college students
without an increase in the supplies of factors of production, how can a nation achieve economic growth?
through technological advancement which enables more output with the same qantity of resources
The idea that becuase of scarcity, producing more of one good or service means producing less of another good or service to the economic conept of
trade-off
each person goes about her daily business seeking to maximize her own self interests. in doing so, she contributes to the welfare of society at large. this is the underlying adam smiths invisible hand
true
entrepreneurs bring together the factors of production to produce goods and services
true
in a free market there are virtually no restrictions, or at best few restrictions on how factors of production can be employed
true
in the circular flow model, households supply resources such as labor services in the product market
true
when voluntary exchange takes place, both parties gain from the exchange
true
marginal analysis involves undertaking an activity
until its marginal benefits equal marginal costs
Adam Smith`s behavioral assumption about humans was that people
usually act in a rational, self-interested way
The three funadmental questions that any economy must address are:
what goods and services to produce; how will these goods and services be produced; and who receives them