ALA 1A (Fundamentals)

_______ ability involves assuming risk and organizing resources into a productive process.

entrepreneurial

Equilibrium occurs when:

the marginal benefit equals the marginal cost.

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

within

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

______ is the idea that people make choices to maximize the overall benefit - or utility - of an action subject to its cost.

Optimization

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.

If an activity is performed where the marginal benefit is greater than the marginal cost (MB > MC), there is:

a net gain to the economy

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.

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

allocation

The production combinations that fall directly on the production possibilities frontier (curve) are _______ and efficient.

attainable

Combinations lying ____ the production possibilities frontier are impossible to produce with the current resources and technology.

beyond.

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 (MB > MC), we should:

continue to increase output until MB = MC.

The more of a good or a service that is produced in a given period of time, the higher the marginal _____ that is associated with each additional unit.

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: Multiple choice question.

decreases

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.

________ 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

When resources are allocated in such a way that it is possible to increase the production of one good only by decreasing the production of another, then the allocation of resources is:

efficient

Combinations of output along the production possibilities frontier correspond to:

efficient use of resources.

In economics - resources can also be called

factors of production

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

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

Economics is about:

how people make choices in a world of scarcity.

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

You are wasting resources that would be better spent elsewhere:

if you continue producing when marginal benefit is less than marginal cost.

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

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

less than

_____ deals with large-scale issues of an economy, such as total output, average price levels (and inflation), and unemployment.

macroeconomics

__________ examines the entire economy of a state - a country - or even the world.

macroeconomics

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

marginal

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

marginal

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

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 ______ cost.

opportunity

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

opportunity

When the marginal benefit equals the marginal cost, we reach a(n):

optimal level of output.

Labor as a resource is defined as all ______ and _____ activity devotes to producing goods and services.

physical ; mental

A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a(n) _______ _______ frontier.

production possibilities

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.

rational

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

rational decision making

The comparison of the scarcity of one good, service, or resource to that of another is called "____ scarcity"

relative

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

relatively more scarce than food in general

Because the world is characterized by scarcity, people must allocate the limited ____ at their disposal among many competing uses.

resources

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

resources

If you decide to produce at a level where marginal cost exceeds marginal benefit (MC > MB), there is a waste _______ of that could be better used somewhere else.

resources

Economics is the study of how individuals and societies allocate ______ resources among many competing uses.

scarce

A common economic situation where an economy's resources are insufficient to meet the existing wants and must be used judiciously is referred to as

scarcity

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

scarcity

Economics studies how individuals and businesses make decisions in a world of...

scarcity

_____ means that resources are limited.

scarcity

_______ -interest is the idea that people choose to do the things that interest them.

self

The idea that people choose to do the things that interest them is:

self-interest.

A strong economic model allows us to analyze the economic events of the world by:

simplifying a very complex economic world.

The ______ of the production possibilities frontier equals the trade-off of the production of one good or service in terms of the other.

slope

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

straight

Marginal cost is:

the additional cost associated with one more unit of an activity.

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.

There is no incentive to either increase or decrease the level of the activity performed when: Multiple choice question.

the marginal benefit equals the marginal cost.

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

Every person's and - ultimately - every economy's standard of living depends on the effective use of resources.

true

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