ECON EXAM CH 1-2
THE PRODUCTION POSSIBILITIES CURVE CAN SHIFT INWARD WHEN
a country experiences a natural disaster
WHEN THE PRESIDENT SAYS THAT HIGH INFLATION RATES ARE A MUCH MORE SERIOUS ECONOMIC PROBLEM THAN HIGH UNEMPLOYMENT ITS AN EXAMPLE OF
a normative statement
SCARCITY IS
a permanent human condition relative to the nearly limitless nature of human desires
THE DIFFERENCE BETWEEN POSITIVE STATEMENTS AND NORMATIVE STATEMENTS IS THAT
a positive statement is a statement of fact and a normative statement involves value judgements
IF AN INCREASE IN ONE VARIABLE CAUSES A DECREASE IN ANOTHER VARIABLE THIS IS
an example of an inverse relationship
WHICH OF THE FOLLOWING DESCRIBES THAT PEOPLE CANNOT EXAMINE EVERY POSSIBLE CHOICE AVAILABLE TO THEM BUT INSTEAD USE SIMPLE RULES OF THUMB TO SORT AMONG THE ALTERNATIVES THAT HAPPEN TO OCCUR TO THEM
bounded rationality
INCENTIVES
change the benefit or cost associated with an action
OBJECTIVE STATEMENTS
claim to describe the way things are
WHICH OF THE FOLLOWING IS TRUE OF INCENTIVES
different people are motivated by different incentives
MICROECONOMICS
focuses on components of the economy
MACROECONOMIC
focuses on overall economic behavior
A MODEL
illustrates the relationship between two variables
AN UPWARDS SLOPING LINE
indicates a positive relationship between the variables
A MAP IS AN EXAMPLE OF A MODEL BECAUSE A MAP
is a simplification of reality
THE SLOPE OF A LINE
is the ratio of the vertical change to the horizontal change as the graph is read from left to right
NORMATIVE STATEMENTS
propose the way things ought to be
OPPORTUNITY COST EXISTS BECAUSE OF
scarcity
IN THE PRODUCTION OF GOODS AND SERVICES TRADE OFFS EXIST BECAUSE
society has only a limited amount of productive resources
YOU HAVE THE OPTION OF CONSUMING ONE CUP OF COFFEE TWO DONUTS OR THREE ORANGES YOU PICKED THE CUP OF COFFEE THEREFORE THE OPPORTUNITY COST OF THIS CUP OF COFFEE IS
the donuts or the oranges whichever you like more
RESOURCES
the inputs that make production possible
A STRAIGHT-LINE PRODUCTION POSSIBILITIES CURVE TAKES THIS SHAPE BECAUSE
the opportunity cost of producing a good is constant
SCARCITY
the problem that human wants exceed the production possible with the limited resources available
ECONOMICS
the study of how individuals and societies use their limited resources to try to satisfy their unlimited wants
OPPORTUNITY COST CAN BE BEST DEFINED AS
the value of the next-highest-ranked alternative
SCARCITY EXISTS BECAUSE
there are not enough resources available to produce all the goods that people want
CONSIDER THE CASE OF A TEACHER WHO TELLS STUDENTS THAT THOSE WHO MISS MORE THAN THREE CLASSES FOR ANY REASON WILL AUTOMATICALLY RECEIVE A LOWER GRADE
this is an example of a negative incentive for students to attend class