Economics Exam 1

production possibilities frontier

A graph that shows the possible combinations of two different goods or services that can be produced with fixed resources and technology is the:

scarcity

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

allocation

At a local town council, people debated a proposal that would change the _______ of public space for recreational use by demolishing a skating park and building an arboretum

production possibilities schedule

A table that shows the possible combinations of two different goods or services that can be produced with fixed resources and technology is the:

Marginal benefit is less than marginal cost

A waste of resources that could have been used to produce something else occurs when:

allocated

Because resources are scarce, they must be _______ between competing uses.

land

All natural resources used in production are classified as the resource called _________.

resources

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

b

Combinations in the exterior of the production possibilities frontier are: a. possible and inefficient to produce b. impossible to produce c. impossible but efficient to produce d. possible to produce

d

Comparative advantage refers to: a. being the one who can produce the most b. being the highest relative opportunity cost producer of a good c. being the producer who has been in the market the longest d. being the lowest relative opportunity cost producer of a good

negative

Decreasing marginal benefit describes the ______ relationship between the marginal benefit associated with the use of a good or a service and the quantity consumed.

scarcity

Due to the _______ of natural resources, we cannot have all the housing and all the forests we may want.

resources

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

macroeconomics

Examines the entire economy of a state, a country, or even the world

d

Gains from trade can be measured by: a. comparing the units of goods traded b. counting the units of goods traded c. identifying the parties in the trade and comparing their overall income d. comparing the levels of consumption available before and after the trade

comparative advantage

Given the option of being self-sufficient or trading with others, as long as a ___________ ___________ exists, there will be potential for trade to make both parties better off.

self-interest

Idea that people choose to do the things that interest them.

Optimization

Idea that people make choices to maximize the overall benefit, or utility, of an action subject to its cost.

b

If an activity is performed where the marginal benefit is greater than the marginal cost, there is: a. an opportunity cost b. net gain to the economy c. net loss to the economy d. equillibrium

firms

In the circular flow model, only by buying resources can ______ produce the output they will sell to households to generate revenue.

physical and mental

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

b

Terms of trade are: a. the total sales value of the product in both markets b. the price of one good in terms of another c. the price of a good in terms of the local currency d. the relationship of the sellers

additional

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

household and firms

The circular flow model shows how ______ and ______ interact in two key markets: the resource market and the product market.

product and resource

The circular flow model shows how households and firms interact in two key markets: the ______ market and the _______ market.

c

The marginal cost of an activity can be found by calculating the change in: a. total benefits as the level of the activity increases by one unit b. total costs of the level of the activity c. total costs as the level of the activity increases by one unit d. total benefits of the level of the activity

c

The opportunity cost of producing a good or a service can be found by: a. identifying the two products that can be produced b. comparing the cost of one good to the total cost c. solving for the cost of one good in terms of another d. subtracting the cost of one good from the cost of another good

allocate

The points on the production possibilities frontier show how we _________ our resources to the production of two different goods or services

specialization

The practice of producing a single good or service rather than producing multiple goods or services is called:

attainable and efficient

The production possibilities frontier shows the production combinations that are both:

capital

The tools, machinery, infrastructure, and knowledge used to produce goods and services are classified as the resource category of:

opportunity

The value of the next best forgone alternative is the ______ cost.

marginal benefit equals the marginal cost

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

microeconomics

Typically deals with how prices are determined in markets and how markets adjust to a variety of different events

fixed

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

inefficient

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:

marginal

When the marginal benefits associated with an activity are compared to its marginal costs, ______ decision making is occurring.

constant opportunity cost

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, there is:

entrepreneurial

______ ability involves assuming risk and organizing resources into a productive process rather using resources in production

human

______ capital refers to the knowledge and skills that people acquire to increase productivity

Physical

_______ capital refers to tangible items that are created to increase productivity.