Term
| In the circular flow diagram, what do firms produce? |
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Definition
1) goods and services using the factors of production
2) outputs using inputs |
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Term
| Which markets are represented in the simple circular flow diagram? |
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Definition
| markets for goods and services and markets for factors of production |
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Term
Which of the following takes place in the markets for the factors of production in the circular flow diagram?
A) Dylan receives a salary for his work as a financial analyst for an investment firm
B) Kristin buys two business suits to wear to her job
C) Jim receives clean water in his home in exchange for paying his water bill
D) Caroline owns a nail salon and receives payments from her clients for her services |
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Definition
| A) Dylan receives a salary... |
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Term
The outer loop of the circular flow diagram represent the flows of dollars in the economy. Which of the following does not appear in the outer loop?
A) wages
B) income
C) capital
D) rent |
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Definition
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Term
According to the circular flow diagram, if Denny is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn...
A) The $50 represents a cost of production for Denny's firm
B) the $50 represents wages, rent, and profit to Denny's firm
C) Denny acts as a firm who interacted in the markets for factors of production with Mrs. Pendleton
D) Denny acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton |
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Definition
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Term
| Any point on a country's PPF represents a combination of two goods that an economy can produce using ____ of available ____ and ____. |
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Definition
| can produce using ALL available resources and technology |
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Term
| Production is efficient if the economy is producing at a point |
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Definition
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Term
| When an economy is operation inside its PPF, we know that... |
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Definition
| there are unused resources or inefficiencies in the economy |
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Term
On a bowed shape PPF, as you move down along the curve...
A) more of one good must be given up to receive one unit of the other good
B) the available production technology doesn't change
C) the opportunity cost increases
D) all the above |
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Definition
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Term
Suppose an economy produces two goods, food and machines. This economy always operates on its PPF. Last year, it produced 1000 units of food and 47 machines. This year, it is producing 1050 units of food and 52 machines. Which of the following events could NOT explain the increase in output?
A) an improvement in technology
B) an increase in available labor
C) a reduction in unemployment
D) Any of these events could explain the increase in output |
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Definition
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Term
| Resources are ___ for households and ___ for economies |
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Definition
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Term
| Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This is an example of? |
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Definition
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Term
| The terms EQUALITY and EFFICIENCY are similar in that they both refer to benefits to society. How do they differ? |
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Definition
| EQUALITY refers to the uniform distribution of those benefits (share) and efficiency refers to maximizing benefits from scarce resources |
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Term
| Rational people make decisions at the margin by comparing... |
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Definition
| marginal costs and benefits |
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Term
Which of the following is NOT an example of a group responding to and incentive?
A) Students attend class because of an attendance policy that reduces their grade for absences
B) Universities offer fewer online classes when they generate more revenue than traditional classes
C) Consumers buy more of a product when it is on sale
D) Employees work harder to earn higher comissions |
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Definition
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Term
| Trade between countries tends to ___ competition and ___ specialization |
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Definition
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Term
| The invisible hand refers to... |
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Definition
| how the decisions of households and firms lead to desirable market outcomes |
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Term
A rationale for government involvement in a market economy is as follows:
A) Markets sometimes fail to produce a fair distribution of economic well-being
B) Markets sometimes fail to produce an efficient allocation of resources
C) Property rights have to be enforced
D) all the above |
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Definition
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Term
A worker in Bangladesh can earn $1/day making cotton cloth on a hand loom. A worker in the United States can earn $100/day making cotton cloth with a mechanical loom. What accounts for the difference in wages?
*hint: What about the labor |
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Definition
| Labor is more productive making cotton cloth with a mechanical loom than with a hand loom |
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Term
| Large or persistent inflation is almost always cause by.. |
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Definition
| excessive growth in the quantity of money |
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Term
| Economists use some familiar terms in specialized ways to... |
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Definition
| provide a new and useful way of thinking about the world |
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Term
Which of the following steps does an economist take when studying the economy?
A) devise theories
B) collect data
C) analyze data
D) all the above |
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Definition
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Term
| Economists make assumptions to |
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Definition
| make the complex world easier to understand |
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Term
| Economic models are useful because |
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Definition
| are usually composed of diagrams and equations |
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Term
| Factors of production are... |
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Definition
| inputs into the production process |
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Term
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Definition
| the limited nature of society's resources |
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Term
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Definition
| the study of how society manages its scarce resources |
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Term
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Definition
| when society gets the most from its scarce resources |
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Term
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Definition
| when prosperity is distributed uniformly among society's members |
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Term
| What is opportunity cost? |
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Definition
| Whatever must be given up to obtain an item |
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Term
| What is a marginal change? |
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Definition
| incremental adjustments to an existing plan |
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Term
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Definition
| something that induces a person to act |
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Term
| What are the principles of how people make decisions? |
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Definition
1) People face tradeoffs
2) The cost of something is what you give up to achieve it
3) Rational people think at the margin
4) People respond to incentives |
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Term
| What are the principles of how people interact? |
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Definition
5) Trade can make everyone better off
6) Markets are usually a good way to organize economic activity
7)Governments can sometimes improve market outcomes |
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Term
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Definition
| group of buyers and sellers (not in one location) |
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Term
| What are the 4 things we must determine to better organize economic activity? |
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Definition
1) WHAT goods to produce
2) HOW to produce them
3) HOW MUCH of each to produce
4) WHO gets them |
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Term
| What system does the invisible hand work through? |
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Definition
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Term
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Definition
| the interaction between buyers and sellers |
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Term
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Definition
| the good's value to buyers and the cost of producing the good |
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Term
| What is the important role of the government? |
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Definition
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Term
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Definition
| when the market fails to allocate society's resources efficiently |
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Term
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Definition
| when the production or consumption of a good affects bystanders |
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Term
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Definition
| a single buyer or seller has substantial influence on market price |
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Term
| What are the principles of how the economy works as a whole? |
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Definition
8) A country's standard of living depends on its ability to produce goods and services
9) Prices rise when the government prints too much money
10) Society faces a short-run tradeoff between inflation and unemployment |
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Term
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Definition
| increases in the general level of prices |
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Term
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Definition
| the amount of goods and services produced per unit of labor |
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