Microeconomics Unit 1 Quiz - Assignment Essays

question

Economics

answer

The science of scarcity OR the study of choices

question

Scarcity

answer

We have unlimited wants but limited resources

question

Microeconomics

answer

Study of small economic units such as individuals, firms, and industries

question

Positive statements

answer

Based on facts. Avoids value judgement (what is).

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Normative statements

answer

Includes value judgements (what ought to be).

question

5 Key Economic Assumptions

answer

1. Society has unlimited wants and limited resources (scarcity).
2. Due to scarcity, choices must be made. Every choice has a cost (a trade-off).
3. Everyone's goal is to make choices that maximize their satisfaction. Everyone acts in their own "self-interest."
4. Everyone makes decisions by comparing the marginal costs and marginal benefits of every choice.
5. Real-life situations can be explained and analyzed through simplified models and graphs.

question

Marginal

answer

Additional

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Marginal Analysis

answer

Making decisions based on the additional benefit vs. the additional cost

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Opportunity cost

answer

The highest-valued alternative that we give up to get something

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3 economic questions

answer

What determines the quantities of the goods and services produced?
How are goods and services produced?
For whom are goods and services produced?

question

Shortages

answer

These occur when producers will not or cannot offer goods or services at current prices. They are TEMPORARY.

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Price

answer

Amount buyer (or consumer) pays

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Cost

answer

Amount seller pays to produce a good

question

Investment

answer

The money spent by BUSINESSES to improve their production

question

Goods

answer

Physical objects that satisfy needs and wants

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Consumer goods

answer

Created for direct consumption (pizza)

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Capital goods

answer

Created for indirect consumption (ovens, knives, blenders)

question

Services

answer

Actions or activities that one person performs for another (teaching, cleaning, cooking)

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Four factors of production

answer

Land, labor, capital, entrepreneurship (C.E.L.L.)

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Land

answer

All natural resources that are used to produce goods and services. Anything that comes from "mother nature". (Water, sunlight, plants, oil, trees, stone, animals)

question

Labor

answer

Any effort a person devotes to a task for which that person is paid. (Manual laborers, lawyers, doctors, teachers, waiters)

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Physical capital

answer

Any human-made resource that is used to create other goods and services (tools, tractors, machinery, buildings, factories)

question

Human capital

answer

Any skills or knowledge gained by a worker through education and experience (college degrees, vocational training)

question

Entrepreneurship

answer

Ambitious leaders that combine the other factors of production to create goods and services.
1. Take initiative
2. Innovate
3. Act as the Risk Bearers so they can obtain PROFIT

question

Production Possibilities Curve (Frontier or Graph)

answer

A model that shows alternative ways that an economy can use its scarce resources. Graphically demonstrates scarcity, trade-offs, opportunity costs, and efficiency.

question

4 key assumptions of PPC

answer

1. Only two goods can be produced
2. Full employment of resources
3. Fixed resources (Ceteris Paribus)
4. Fixed technology

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Efficient

answer

Anywhere on the curve of a PPC

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Inefficient (Unemployment or in a recession)

answer

Beneath the curve of a PPC

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Impossible (Unattainable)

answer

Above the curve of a PPC

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Constant opportunity cost

answer

Resources are easily adaptable for producing either good

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Law of increasing opportunity cost

answer

As you produce more of any good, the opportunity cost (forgone production of another good) will increase. Why? Because resources are NOT easily adaptable to both goods. The result is a bowed out (concave) PPC

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Productive efficiency

answer

Products are being produced in the least costly way (any point ON the Production Possibilities Curve).

question

Allocative efficiency

answer

The products being produced are the ones most desired by society (socially optimal). This optimal point on the PPC depends on the desires of society.

question

3 shifters of the PPC

answer

1. Change in resource quantity or quality
2. Change in technology
3. Change in trade

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Open vs. closed trade

answer

Open: access to more resources. Closed: less access to resources

question

Growth

answer

Countries that produce more capital goods will have more _____ in the future.

question

Comparative advantage

answer

One nation (individual/company) can produce a good at a lower opportunity cost than the other. This comes into play when one individual (nation, company...) has the absolute advantage in both.

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Output method

answer

Put the output of each product over the output of the other product for the same person. This makes a fraction. Look at the opportunity cost. The person with the lowest opportunity cost should produce the good that costs the least. (Output = Other goes Over)

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Never

answer

When will there be a situation in which someone has comparative advantage in both?

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Input method

answer

Divide the input required for each product into the input for the other product. Then take the one with the lowest opportunity cost. (Input = Other goes Under)

question

Absolute advantage

answer

Who can do the most. Output: look at the LARGER number. Input: look at the SMALLER number.

question

Centrally planned economies

answer

The government 1) owns all the resources, 2) answers the three economic questions.

question

Free market

answer

1. Little government involvement in the economy (laissez faire = let it be).
2. Individuals OWN resources and answer the three economic questions.
3. The opportunity to make PROFIT gives people INCENTIVE to produce quality items efficiently.
4. Wide variety of goods available to consumers.
5. Competition and self-interest work together to regulate the economy (keep prices down and quality up).

question

The invisible hand

answer

The concept that society's goals will be met as individuals seek their own self-interest. Competition and self-interest act as this that regulates the free market.

1 of 44

question

Economics

answer

The science of scarcity OR the study of choices

question

Scarcity

answer

We have unlimited wants but limited resources

question

Microeconomics

answer

Study of small economic units such as individuals, firms, and industries

question

Positive statements

answer

Based on facts. Avoids value judgement (what is).

question

Normative statements

answer

Includes value judgements (what ought to be).

question

5 Key Economic Assumptions

answer

question

Marginal

answer

Additional

question

Marginal Analysis

answer

Making decisions based on the additional benefit vs. the additional cost

question

Opportunity cost

answer

The highest-valued alternative that we give up to get something

question

3 economic questions

answer

What determines the quantities of the goods and services produced?
How are goods and services produced?
For whom are goods and services produced?

question

Shortages

answer

These occur when producers will not or cannot offer goods or services at current prices. They are TEMPORARY.

question

Price

answer

Amount buyer (or consumer) pays

question

Cost

answer

Amount seller pays to produce a good

question

Investment

answer

The money spent by BUSINESSES to improve their production

question

Goods

answer

Physical objects that satisfy needs and wants

question

Consumer goods

answer

Created for direct consumption (pizza)

question

Capital goods

answer

Created for indirect consumption (ovens, knives, blenders)

question

Services

answer

Actions or activities that one person performs for another (teaching, cleaning, cooking)

question

Four factors of production

answer

Land, labor, capital, entrepreneurship (C.E.L.L.)

question

Land

answer

All natural resources that are used to produce goods and services. Anything that comes from "mother nature". (Water, sunlight, plants, oil, trees, stone, animals)

question

Labor

answer

Any effort a person devotes to a task for which that person is paid. (Manual laborers, lawyers, doctors, teachers, waiters)

question

Physical capital

answer

Any human-made resource that is used to create other goods and services (tools, tractors, machinery, buildings, factories)

question

Human capital

answer

Any skills or knowledge gained by a worker through education and experience (college degrees, vocational training)

question

Entrepreneurship

answer

Ambitious leaders that combine the other factors of production to create goods and services.
1. Take initiative
2. Innovate
3. Act as the Risk Bearers so they can obtain PROFIT

question

Production Possibilities Curve (Frontier or Graph)

answer

A model that shows alternative ways that an economy can use its scarce resources. Graphically demonstrates scarcity, trade-offs, opportunity costs, and efficiency.

question

4 key assumptions of PPC

answer

1. Only two goods can be produced
2. Full employment of resources
3. Fixed resources (Ceteris Paribus)
4. Fixed technology

question

Efficient

answer

Anywhere on the curve of a PPC

question

Inefficient (Unemployment or in a recession)

answer

Beneath the curve of a PPC

question

Impossible (Unattainable)

answer

Above the curve of a PPC

question

Constant opportunity cost

answer

Resources are easily adaptable for producing either good

question

Law of increasing opportunity cost

answer

question

Productive efficiency

answer

Products are being produced in the least costly way (any point ON the Production Possibilities Curve).

question

Allocative efficiency

answer

The products being produced are the ones most desired by society (socially optimal). This optimal point on the PPC depends on the desires of society.

question

3 shifters of the PPC

answer

1. Change in resource quantity or quality
2. Change in technology
3. Change in trade

question

Open vs. closed trade

answer

Open: access to more resources. Closed: less access to resources

question

Growth

answer

Countries that produce more capital goods will have more _____ in the future.

question

Comparative advantage

answer

One nation (individual/company) can produce a good at a lower opportunity cost than the other. This comes into play when one individual (nation, company...) has the absolute advantage in both.

question

Output method

answer

question

Never

answer

When will there be a situation in which someone has comparative advantage in both?

question

Input method

answer

Divide the input required for each product into the input for the other product. Then take the one with the lowest opportunity cost. (Input = Other goes Under)

question

Absolute advantage

answer

Who can do the most. Output: look at the LARGER number. Input: look at the SMALLER number.

question

Centrally planned economies

answer

The government 1) owns all the resources, 2) answers the three economic questions.

question

Free market

answer

question

The invisible hand

answer

The concept that society's goals will be met as individuals seek their own self-interest. Competition and self-interest act as this that regulates the free market.

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