Connect Practice CH 1 - Economics: The Core Issues

Microeconomics

- A US software firm laid off 15 workers last month and transferred the work to India. - Recently, Smithville Bank lowered its interest rate on business loans by 2 percentage points - AN unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise.

The importance of the production possibilities model is that it shows the different combinations of goods and services that society can produce ___.

- efficiently - with a given amount of resources - in a fully employed economy - inefficiently

Combinations of output that fall inside the production possibilities curve of an economy represent:

- goods that are attainable - the inefficient use of resources

The factors of production include:

- land - labor - capital - entrepreneurship

an entrepreneur ___.

- makes strategic business decisions that set the course of an enterprise - takes the risk of earning profits or suffering losses from owning an enterprise - innovates

Ceteris paribus

- other things equal - the idea that factors other than those being considered in a particular analysis do not change

The "economy is us" means that it represents our collective:

- production activities - consumption activities

Combinations of goods that fall outside the production possibilities curve of an economy ____.

- require economic growth - are unattainable in the short run - would require resources that are not currently available

Macroeconomics

- the Consumer Price Index (CPI) rose by 3% in 2007 - the real GDP for the US grew by 2.2% in 2007 -the trade deficit between the US and China grew between 2000 and 2009

As such, the PPC illustrates two essential principles: 1) ___ meaning that there's a limit to the amount of output we can produce in a given time period with available resources and technology 2) __ is the idea that we can obtain additional quantities of any particular good only by reducing the potential production of another good

1) scarce resources 2) opportunity costs

Capital

A computer

Land

A forest

Entrepreneurship

A person who uses resources in innovative ways.

Labor

A steel worker

True or False: The three main decisions that must be addressed by an economic system include which goods to demand, how to motivate employees, and how to distribute goods in a market.

False

True or False: A trade-off occurs when some quantity of production or consumption of a good or service is given up in order to produce or consumer another good or service.

True

Points __ an economy's production possibilities curve are attainable as long as the economy is producing efficiently.

along

For economists, ___ goods are goods that are used to produce final consumer goods and services.

capital

The branch of economics that studies the economy as a whole or in the aggregate is known as:

macroeconomics

The economic question of "___ to produce" is about decisions related to who is going to consume the goods and services produced.

for whom

The economic question of "___ to produce" is about decisions related to the mix of factor inputs (land, labor, capital...) used to produce goods and services.

how

In addition to entrepreneurship, the factor of production (resource) defined as __ consists of the physical actions and mental activities that people contribute to the production of goods and services.

labor

To economists, land includes all ___, or gifts of nature, used in the production process.

natural resources

A production possibilities curve shows the attainable combinations:

of two goods that can be produced given a specific set of resources

Due to scarce resources, every individual, whether rich or poor, is faced with a(n) __ cost when choosing to produce or consume more of one good over another.

opportunity

Each point on the production possibilities curve represents some alternative _____ of two or more products.

output combination

Points lying _____ the production possibilities curve are unattainable, with the current availability of resources and technology.

outside

The essential feature of the market mechanism is the ___ signal.

price