ch5 test

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Mutually agreeable

Economic transactions willingly undertaken by both the buyer and the seller because each feels that the transaction will make him or her better off

Competition

The presence in a market of independent buyers and sellers who compete with one another and who are free to enter and exit the market as they each see fit

Private property

The right of private persons and firms to obtain, control, employ, dispose of, and bequeath land, capital, and other property

A woman who wants to start a flower shop finds she cannot do so unless the central government has already decided to allow a flower shop in her area

command system

circular flow model- bottom right corner (blue line)

consumption expenditures

circular flow model- Top left corner (blue line)

cost

why is private property important in the market system

it gives individuals the exclusive right to use their resources as they see fit

why does the use of money contribute to economic efficiency

it promote specification by overcoming the problem with bartering

circular flow model- top right corner (red line)

labor, land, capital, entrepreneurial ability

What are the 4 factors of production?

land, labor, capital, and entrepreneurial ability

macro or micro : the unemployment rate in the us was 5.1 percent in September of 2015

macro

A person should consume more of something when its ___________ __________ exceeds it's ______________ ___________

marginal benefits marginal lost

Shops stock and sell the goods customers want but the government levies a sales tax on each transaction to fund elementary schools, public libraries, and welfare programs

market system

what is the circular flow model

1- rent, wages, interest projects 2- land, labor 3- goods and services 4- revenue and consumption

what are the two characteristics that make economic systems differ

1. degree of decentralized use of market 2. degree of centralized government control

What is a budget line

A line that shows the different combinations of two products a consumer can purchase with a specific money income, given the products' prices.

What is economics defined as?

A social science concerned with making optimal choices under conditions of scarcity

What is a positive statement?

A statement that includes statistics and can be backed by statics. Ex-

Utility

Ability or capacity of a good or service to be useful and give satisfaction to someone.

The only taxes levied by the government are to pay for national defense, law enforcement, and a legal system designed to enforce contracts between private citizens

Laissez-faire system

macro or micro : U.S. output adjusted for inflation, increased by 2-4 percent in 2014.

Macro

What is macroeconomics concerned with?

Macroeconomics is the part of economics concerned with the economy as a whole and decision making by large units.

where is the optimal output on a graph

Mc=Mb

What is microeconomics concerned with?

Micro economics deals with specific things inside economics

In economic terms what does "utility" mean

Pleasure or satisfaction

what does consumer sovereignty mean?

Producers produce what households want to consume.

Economists content that most economic decisions are_______________.

Purposeful

Opprotunity Cost

The cost of the next best use of your time or money when you choose to do one thing over another

Freedom of enterprise

The freedom of firms to obtain economic resources, decide what products to produce with those resources, and sell those products in markets of their choice

Freedom of choice

The freedom of resource owners to dispose of their resources as they think best; of workers to enter any line of work for which they are qualified; and of consumers to spend their incomes in whatever way they feel is most appropriate

Self-interest

What each individual or firm believes is best for itself and seeks to obtain

what are the five fundamental questions

What will be produced? How will goods and services be produced? Who will get the output? How will the system accommodate change? How will the system promote progress?

What is creative destruction?

When new products and production methods destroy the market position or firms that are not willing to adjust.

What is a normative statement?

a statement that includes a value judgement and cannot be refuted just by looking at the evidence Ex-

marginal analysis

analysis that involves comparing marginal benefits and marginal costs

what does the law of increasing opportunity state

as more of a particular good is produced it's marginal opportunity cost increases

circular flow model- bottom left corner (red line)

goods and services

circular flow model- bottom right corner (red line)

goods and services

macro or micro : A U.S. software firm discharged 15 workers last month and transfers workers to India

micro

macro or micro : An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise

micro

macro or micro : Last week, Wells Fargo Bank lowered its interest rate on business loans by one-half of 1 percentage point.

micro

circular flow model- Top right corner (blue line)

money income ( wages, rents, interests, profits)

why is money not an economic resource.

money is used to buy resources, money itself doesn't produce anything

circular flow model- Top left corner (red line)

resources

circular flow model- bottom left corner (blue line)

revenue

What does a production possibilities curve show?

the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time l these curves show what the opportunity cost will be if a particular action is taken.

Economics

the social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity

broadly defined what does competition involve

there are independently acting buyers and sellers in each market


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