2.1 Econ Quiz

Consumption goods and services represent...

85% of US production by value and that percentage does not fluctuate much

Financial Capital is Not Capital

In everyday language, we talk about money, stocks, and bonds as being capital. These items are financial capital, and they are not productive resources. They enable people to provide businesses with financial resources, but they are not used to produce goods and services. They are not capital.

4. In the US, which factor of production earned the largest share of income in 2011 and what percentage did it earn?

Labor is the factor of production that earns the largest share of income. In 2011, labor in the US earned 69% of total income.

Labor is the productive resource that _____.

Labor is the productive resource that *gets highest fraction of income.*

3. The productive resources that are used to produce goods and service _____ are factors of production.

Land, labor, capital, and entrepreneurship

Factors of production are grouped into four categories:

Land, labor, capital, and entrepreneurship

People earn their income by...

Rent, wages, interest, and profit

1. Which of the following is an example of consumption goods and services?

Ron bought a Nissan Altima last summer

7. Which of the following is an example of entrepreneurship?

Sam Walton created the multinational retail corporation brand Walmart in 1962.

Eye of the Past: Changes in What We Produce

The United States has changed in the way we produce. A lot of what used to be done by hand is now done by computers.

2. Name the four factors of production and the incomes they earn.

The factors of production are land, labor, capital, and entrepreneurship. Land earns rent; labor earns wages capital earns interest; and entrepreneurship earns profit or incurs a loss.

3. Distinguish between the functional distribution of income and the personal distribution of income.

The functional distribution of income shows the percentage of total income received by each factor of production. the personal distribution of income shows how total income is shared among households.

2. Which of the following is an example of capital goods?

The government will open another public school in the area.

Profit

income earned by an entrepreneur for running a business

Wages

income paid for the services of labor

Interest

income paid for the use of capital

Rent

income paid for the use of land

Entrepreneurship

is the human resource that organizes labor, land, and capital. Entrepreneurs come up with new ideas about what and how to produce, make business decisions, and bear the risks that arise from these decisions.

1. What are the types of goods and services produced? Give an example of each and distinguish between them.

Two types: consumption goods and services and capital goods. A hamburger is a consumption good and a haircut if a consumption service. An oil rig an auto assembly line are capital goods. A consumption good or service is an item that is brought by individuals or the government and is used up in the current period. A capital good is brought by businesses or the government and ti is used over and over again to produce other goods and services.

Factors of production:

are the productive resources used to produce good and services

Interest is the income paid for the use of _____.

capital

Capital

consists of tools, instruments, machines, buildings, and other items that have been produced in the past and that businesses now use to produce goods and services. Capital includes semifinished goods, office buildings, and computers. Capital does not include money, stocks, and bonds. They are financial resources.

4. Land is the _____ that we use to produce goods and services.

gifts of nature or natural resources

Consumption goods and services

goods and services that are brought by individuals and used to provide personal enjoyment and contribute to a person's standard of living. Examples: movies and laundromat services

Capital goods

goods that are brought by businesses to increase their productive resources. Examples: cranes and trucks

Land

includes all the "gift of nature" that we use to produce goods and services. Land includes all the things we call natural resources. Land includes minerals, water, air, wild plants, animals, birds, and fish as well as farmland and forests.

Profit (or loss) is the _____ earned by an entrepreneur for running a business

income

Rent is the income paid for the use of _____.

land

personal distribution of income

the distribution of income among households

functional distribution of income

the distribution of income among the factors of production

Human capital

is the knowledge and skill that people obtain from education, on-the-job training, and work experience.

6. Human capital _____ that people obtain from education, on-the-job training, and work experience. _____ that have been produced in the past and that businesses now use to produce goods and services is capital.

is the knowledge and​ skill; ​Tools, instruments,​ machines, buildings, and other items

Labor

is the work time and work effort that people devote to producing goods and services. The quality of labor depends on how skilled people are - what economists call human capital.

Wages are the income paid for the services of _____.

labor

5. The _____ that people devote to produce goods and services is labor.

work time and work effort

Eye of the Economy: What We Produce

- Health services, real estate, professional and business services, manufacturing, finance and insurance, education, retail trade, wholesale trade, information, arts/recreation/hotels/food, construction, transportation, utilities, mining, and agriculture - Goods and services: chemicals, computers, food and drink, petroleum coal, machinery, fabricated metal, transportation equipment, plastics and rubber, and motor vehicles

We divide the vast array of goods and services produced into:

- consumption goods and services - capital goods - government goods and services - export goods and services

Practice Problems

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