Fundamentals-preclass ECO2302

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

Allocation

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

Blank 1: resources, resource, or inputs Blank 2: technology, tech, or capital

Someone who is self-interested only performs actions for his or her own benefit and not for the benefit of others.

False

Martin has given himself an entertainment budget of $5 per week. He has decided that each week he will spend that $5 by either attending a matinee movie at his local theater or downloading five songs by one of his favorite artists. What is the non-monetary opportunity cost of seeing a movie this week?

Five songs

Suppose a firm spends $10,000 to train its employees on a new, company-wide software program that it has already purchased and intends to adopt in the following month. In this case, the knowledge gained through the training is considered:

Human capital

The study of ___ deals with how the whole economy can be affected by important national and global events, such as wars and natural disasters. (Enter only one word in the blank.)

Macroeconomics

is the result of low-cost producers focusing all their efforts on producing a single good or service.

Specialization

Clara can spend her afternoon doing one of three things: She can study economics, plant a sapling in her garden, or wash her car. Suppose she values spending time in the garden most; next her time washing the car; and her time studying economics the least. What is the opportunity cost of planting a garden?

Washing her car

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

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

Producing a good or a service at a lower opportunity cost gives the producer:

a comparative advantage in the market.

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.

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.

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

Combinations lying the production possibilities frontier are possible but inefficient with the current resources and technology.

beneath

For an entire economy, the production possibilities frontier is going to be:

bowed out because we have different resources with different opportunity costs.

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

comparative

The simple model of production assumes that the opportunity cost of production is:

constant

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

constant

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

continue to increase output until MB = MC

When the marginal benefit of an activity equals the marginal __ , there is no incentive to either increase or decrease the level of the activity performed.

cost

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

decrease

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

decreases.

Specialization causes individuals and nations to rely on one another and increases the:

degree of interdependence between them.

On a production possibilities frontier (PPF) with Good X on the horizontal axis and Good Y on the vertical axis, we can say that the slope of the PPF (in absolute value) equals the opportunity cost of producing Good X with respect to the production of Good Y. This is true because the slope:

describes the trade-off resulting from the production of Good X in terms of Good Y.

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

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

ability is the ability and vision to combine land, labor, and capital into a productive process, taking on the risks and rewards that are inherent in any new venture. (Enter one word in the blank.)

entrepreneurial

When resources are _ , increasing the production of one good causes a decrease in the production of the other.

fixed

Graphing the information in the production possibilities schedule produces the production possibilities:

frontier

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.

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

increases.

The law of __ opportunity cost says that because some resources are better suited to producing one good or service than another, as the production of a good or a service increases, the __ cost of each additional unit rises.

increasing;opportunity

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.

On a production possibilities frontier (PPF), if you are able to increase the production of both goods at the same time, then initially resources were allocated

inefficiently

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.

Optimization behavior implies that if the marginal benefit of an activity is ______ ______ its marginal cost, you should not engage in that activity.

less than

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.

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

lowest

The additional benefit associated with one more unit of an activity is the _____ benefit.

marginal

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

marginal benefit = 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.

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.

Focusing production entirely on one good or service leaves you susceptible to changes in the

market

Which branch of economics typically deals with how prices are determined in markets and how markets adjust to a variety of different events?

microeconomics

Combinations outside of the production possibilities frontier are:

not currently possible to produce.

Spending more money on one thing means that you have less money to spend on something else. This is called

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.

When a decision maximizes overall benefit, it is called:

optimization.

Money spent by a firm on machinery that is designed to improve future productivity is called:

physical capital

Each row of the tabular __________ illustrates the maximum amount of a good or a service that can be produced given the production of the other.

production possibilities schedule

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

production possibilities schedule.

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

rational decision making.

Tomatoes represent a small subset of food, so tomatoes are:

relatively more scarce than food in general.

Anything that is used to produce a good or a service, whether it is provided by nature or is manufactured, is called a(n)

resource

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

Every person's and every economy's standard of living relies on the effective use of

resources

Economics is the study of how individuals and societies allocate:

scarce resources among many competing users.

Since Chevrolet Camaros represent a small subset of all automobiles in existence, they are relatively more:

scarce than automobiles in general.

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

scarcity

The term _________ describes the fact that unlimited wants cannot be completely satisfied with limited resources.

scarcity

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.

For an entire economy, the production possibilities frontier is going to be bowed out because:

some resources are better suited for producing some goods or services than others.

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.

Increasing marginal cost describes:

the direct relationship between the marginal cost associated with the use of a good or a service and the quantity produced.

Decreasing marginal benefit describes

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

Opportunity cost is defined as:

the value of the opportunity that you give up when you choose one activity instead of another.

The marginal benefit of an activity can be found by calculating the change in:

total benefits as the level of the activity increases by one unit.

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.

Comparative advantage is the foundation for establishing the benefits of

trade

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

unlimited;limited

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

uses resources too quickly.

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

varies.

If you decide to produce at a level where marginal cost exceeds marginal benefit, there is an _

waste of resources that could be better used somewhere else.