Social Studies Praxis: Microeconomics

Capital refers to what type of economic resource? A. resources used to produce something else B. financial resources used to conduct economic activity C. resources which are naturally renewable D. resources which exist in the natural environment

A. Capital refers to assets which are used to produce something else, such as a piece of machinery in a factory which allows you to produce an automobile.

Timmy and John are two second-grade students working together on a group project. The project requires one student to cut out magazine pictures of forests while the other student organizes them in a book. Timmy and John decide that since Timmy can cut faster than John, and John is better at organizing than Timmy, so Timmy will cut the pictures and John will organize the pictures. Which of the following economic principles can be observed during this scenario? A. comparative advantage B. opportunity cost C. scarcity D. monopolistic competition

A. Comparative advantage refers to the idea that a specific person, people, or geographic area had an advantage in the production process of a good.

In economics, the need to make choices arises due to: A. scarcity. B. consumers. C. producers. D. opportunity cost.

A. If goods were not scarce, prices would be very low, and we would be able to buy them all; since they are, consumers and producers need to make choices on how they spend their money.

................. - The ability of an entity to produce more of a good or service than another entity using the same amount of resources. If Person A can produce 10 widgets with 10 tools and Person B can produce only 5 widgets with 10 tools, Person A has the absolute advantage of making widgets.

Absolute advantage

............, the father of capitalism, argued that when individuals seek their own interest, an ............ guides the economy to its greatest productivity. If prices for an item go too high, people—acting in their own self-interests—will stop buying it, causing the price to eventually drop, which will increase consumption and right the market. The invisible hand theory states that the economy is not led by an entity, but is the result of many individuals acting in their own self-interests.

Adam Smith invisible hand

The ideology of classical capitalism was expressed by........ . in his book An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776. In it, he attacked mercantilism and advocated a doctrine regarding the economic liberty of the individual. He called this doctrine ............., which translates to "let the people do as they choose." Smith meant that the government should not interfere in economic matters.

Adam Smith laissez-faire

During the ............ (early 15th century through early 17th century), European ships traveled around the world to search for new trading routes and partners to feed burgeoning capitalism in Europe. As trade increased, merchants and national leaders began exploring an alternate trade route to circumvent the Arabic and Italian monopolies.

Age of Exploration

The Dutch East India Company was one of the first ________ types of commercial organization. A. a stock market B. a joint stock company C. a co-op D. a monopoly

B. A joint stock company is an organization that allows individuals to purchase shares and receive dividends for their investment. This made it easier to raise large amounts of capital to fund world trading ventures.

Which of the following is likely to be examined through the study of Macroeconomics? A. how much you would be willing to pay for a new pair of shoes B. the national average interest rate for a 30-year home loan C. the price of a gallon of milk D. the decision whether or not to operate a pizza parlo

B. Macroeconomics is the study of the function and operation of the large-scale, national, and global economy.

Natural resources have which of the following unique features? A. natural resources are comprised of animals used for labor B. natural resources exist on their own C. natural resources are free D. natural resources are always the first resources to be utilized

B. Natural resources are the only resources that exist on their own. As such they require human intervention to be usable in economic activity.

Which of the following best describes the impact of the Age of Exploration on the economy? A. New monopolies strengthened mercantilism. B. Access to new markets led to the transition from mercantilism to capitalism. C. Increase in European imports decreased European exports. D. Increased tariffs reinforced mercantilism.

B. The economic pressures of this era led to many innovations in navigation and ship construction. This massive market expansion led to the end of mercantilism as more and more trading partners were possible. This brought the advent of capitalism.

Which of the following best describes the effect of the Black Death on capitalism? A. With significant deaths among the upper class, their wealth was dispersed to the serfs. B. With fewer serfs to support lords, serfs were able to demand more money, eventually buying their freedom and move into towns. C. Port cities, mostly spared from the plague, flourished. D. Money was spent to improve sanitation, creating new trades for townspeople.

B.The serfs could buy their freedom and move off the manor into towns. Combined with the effects of exploration, the creation of the merchant class would soon follow.

The ........... helped to facilitate the eventual creation of capitalism by causing the end of feudal society. Because the plague killed between 30% and 60% of the European population, there were fewer serfs to perform labor. Therefore, the serfs could demand more pay from their feudal lords and the lords lost their hold on the lower classes. The serfs could buy their freedom and move off the manor into towns. Combined with the effects of exploration, the creation of the merchant class would soon follow.

Black Plague

Microeconomics is best understood as: A. the study of government institutions. B. the structure and function of the global economy. C. the study of individuals and their decisions. D. the investigation of low-value economic transactions

C. Microeconomics considers the actions of individuals and the reasoning behind why they make their individual economic choices.

Within the hardwood furniture market, a country that has a large amount of forests ready to be responsibly turned into lumber. This country is high in what type of resource? A. human B. nonrenewable C. natural D. capital

C. Natural resources are resources that come from nature. A timber forest is a natural resource.

In economics, the "opportunity cost" of a choice refers to the cost of: A. the sum of all forgone opportunities. B. monetary loss resulting from an action. C. the next-best forgone activity. D. utility lost by not pursuing another option.

C. Opportunity cost is the concept that the cost of an activity is not the monetary loss a person receives, but rather what could their time and efforts have otherwise been spent on.

Billy is saving to buy a new phone. Billy's friends invite him to go to dinner and a movie. He wants to go, but decides that saving his money for a new phone is more important. Billy's choice best demonstrates which of the following? A. comparative advantage B. scarcity of resources C. opportunity cost D. supply and demand

C. Opportunity cost is the concept that the cost of an activity is not the monetary loss a person receives, but rather what their time and efforts could otherwise have been dedicated to.

Which of the following identifies the situation faced by two consumers, both of whom want to purchase a the single available copy of a novel at their local bookstore? A. surplus B. embargo C. scarcity D. market equilibrium

C. Scarcity is the economic situation when a good is demanded but cannot be had because supply is lower than demand.

The game of musical chairs, where there is always one less chair than there are players in the game, best demonstrates which of the following? A. supply and demand B. opportunity cost C. scarcity of resources D. comparative advantage

C. Scarcity refers to the limitation of resources in a given scenario or economic action.

In a sixth-grade classroom, two students argue over the use of a single glue stick. Which economic principle does this best provide a teachable moment for? A. free trade B. mercantilism C. scarcity D. opportunity cost

C. Scarcity refers to the limitation of resources in a given scenario. In this case, the glue stick is a limited resource.

................. - At its base form, capital is an asset that allows you to produce something else. It may be physical, such as a piece of machinery which allows you to produce a finished textile, or the airplane, which flies customers to their destination. Or it may be intangible, such as the knowledge and experience which allows you to assemble an automobile.

Capital resources

.............. is an economic system characterized by private, rather than government, ownership of industry. Prices, production, and distribution of goods are determined by competition in a free market. Roots began during the 1400s, formally arose in 1776, and continues to impact economies today.

Capitalism

............. - The ability of an entity to produce a good or service at a lower opportunity cost than another entity.

Comparative advantage

Which of the following will most likely increase labor productivity in a workforce? A. an increase in the cost of capital B. an increase in government regulations C. a decrease of technological innovation D. division of labor

D. The division of labor is dividing laborers into different divisions that focus on one task. An example would be the assembly line. Instead of one laborer performing all the functions, it is more efficient to have many workers doing many functions as it will increase productivity.

........Economics is the study of how goods and services are produced, distributed, and consumed in an environment of scarcity. It asks the question: How do people use the resources available to them?

Economics

The Black Plague, in killing a substantial amount of the European laborer population, led to the fall of .........

Feudalism

................ - The people who make up the labor force of any organization. Labor of any sort that is required to produce a good or service must come from human resources.

Human resources

................- the design and function of the economy as a whole Focused on the institutions, policies, and outcomes of large-scale economies, such as those of regional, national, or global governments and organizations

Macroeconomics

.............. - the study of individuals and their decisions Studies why people make the economics decisions they do, for example: why someone chooses to buy a pair of shoes or why a store decides to sell only pink roses.

Microeconomics

............. - Assets used in production of a good which exist in the natural environment. While they may require human intervention to become usable, they exist on their own without initial human cultivation. Most natural resources are non-renewable, and susceptible to overuse and depletion without careful management.

Natural resources

trade barriers include: A maximum price allowed to be charged for a particular good, set by the government

Price controls

The most notable explorer was ............. of Portugal. He began investing in Portugal's navy through the creation of better ships that could sail faster and farther than previous ships. Portuguese explorers began sailing up and down the coast of Africa, eventually sailing around the tip of Africa and finding India. Prince Henry's success expanded naval innovation and created bigger, stronger, and faster ships to increase profits.

Prince Henry the Navigator

trade barriers include: Government payments to an industry, reducing costs or creating false demand

Subsidies

trade barriers include: A tax on imports or exports, changing the price and driving buyers to certain producers or industries

Tariffs

trade barriers include: A limit to the amount of a good that can be imported or exported

Trade cap

At the root of ........ is the belief that, in a free enterprise environment, individuals will make rational decisions to maximize their benefits in life. This, in turn, will result in the betterment of everybody. Consumers will seek out the goods that best serve their well-being, forcing producers to produce high quality goods at low prices.

capitalism

Both branches of economic thought seek to understand the effect of the ............... of good, services, and money through the economy from consumers to producers and back again.

circular flow

Voluntary exchange and private property, combined with the natural scarcity of resources, creates an environment of ............ among market participants. Competition is the driving force of a capitalist economy. In theory, companies will strive for a greater share of the market. In doing so, they must create goods of higher quality and cheaper price to attract customers to consume their products. When companies compete in this manner, the best are awarded profits and are able to continue, while weakest are punished with losses and—if they do not adapt—are driven from the market. The consumer wins when companies compete because they receive a better product, typically at a cheaper price.

competition

Because of this, all people must use ............. (make trade-off decisions) to make their choices.

cost-benefit analysis

Pure capitalism requires .........., the ability for one country to trade with another without hindrance so that all goods can be produced with the greatest efficiency. In reality, a truly free global market would leave some countries to produce nothing because they have no comparative advantage.

free trade

Divisions of labor also leads to an ............ Because no single economy produces all of the products its society needs—or all the demand for those goods—all economies require each other to function. For example, consider a smartphone. The technology for the phone may be developed in one country, the internal electronics in another, the outer casing in a third, and then it may be sold in a fourth.

interdependence of economies

Individuals bought shares in a company and received dividends on their investment. This type of company made it easier to raise large amounts of capital for world-trading ventures. One of the first joint-stock companies was the Dutch East India Company.

joint-stock company

The economic policy of most nations in the seventeenth century was .........., which focused on creating a strong country by creating a strong economy. Therefore, monopolies were granted, internal industries were protected, and high tariffs were placed on imports.

mercantilism

The lost study time is the ............ of attending the basketball game. Is not about money, but about the general use of resources. It asks the question: what did an individual not do in order to complete the activity they are currently doing? To determine the opportunity cost of an action, look at what else could have been done with the resources used. It does not include all possible opportunities, though—only the next-best one.

opportunity cost

Although the resources available can differ from person to person, no human has all of the resources necessary to fulfill every one of his needs and desires. Economists call this ....... All humans operate in a world where time, money, and natural resources are limited.

scarcity

Comparative advantage leads to .......... Rather than all companies or countries producing everything, they focus their resources on the areas where they have a comparative advantage and use trade to acquire other products. This division of labor results in the greatest economic productivity.

specialization

Therefore, capitalist nations continually seek to expand their markets through ......., the exchange of products for money between entities. Companies and nations seek to gain an advantage to earn the most profit from the exchange.

trade

Countries often want to increase their market share of a product even if they do not have a comparative advantage in that product. In order to achieve this, countries create..........., obstacles to trade.

trade barriers

In the sixteenth century, trade flourished in three main areas: the Mediterranean in the south, the Low Countries and the Baltic region in the north, and central Europe. When overseas trade expanded, the Atlantic seaboard began to serve a more important role, joining the ....... areas together and creating more of an integrated market that was vulnerable to price shifts.

trading