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Economics Unit 1
Terms in this set (102)
produced goods that can be used as resources for further production (Factories, machines, etc.)
Four Factors of Production
Land, Labor, Capital, Entrepreneurship
air, animals, water, etc.
a person who has a special talent for searching out and taking advantage of new business opportunities
has a special talent and is a risk taker
when it drops below the ppf graph (not maximizing resources)
the science that studies the choices of people trying to satisfy their wants in a world of scarcity
occurs when our wants are greater than the resources available to meet them
alternative (more of one thing = less of another thing)
the most highly valued opportunity or alternative forfeited when a choice is made
standard of living
the degree of wealth and material comfort available to a person or community
an economic system in which the answers to the 3 economic questions are based on customs, traditions, and cultural beliefs
a different kind of economic system in which the government may control or own many of the resources, also referred to as a socialist economy
an economic system in which individuals own all or most of the resources and control their use, also known as a capitalist economy
an economy that is neither purely capitalist nor purely socialist, an economy that has some elements of both capitalism and socialism
any good that is owned by an individual or a business
Choice, freedom of
workers have the right to choose what work they want to do and whom they will work for
individuals have the right to make exchanges or trades that they believe will make them better off
free enterprise gives way to ...
money gives people the purpose to work
something you can physically touch
something you can't touch
the way all income earned in a country is divided among different groups of income earners
an economic system in which individuals own all or most of the resources and control their use
the government tells the people what they need to buy and produce
A process by which individuals and businesses in any part of the world are much more affected by events elsewhere in the world than they used to be
when work is done for a company by persons other than the original company's employees in a country other than the one in which the company is located
the government can take over private property as long as they pay them justly in compensation
the amount if money left over after all the costs of production have been paid
occurs when the total cost exceeds the total revenue
a beneficial side effect of an action that is felt by others
an adverse side effect of an act that is felt by others
a good of which one person's consumption does not take away from another person's consumption
excludable public good
a public good that individuals can be excluded (physically prohibited) from consuming
nonexcludable public good
a public good that individuals cannot be excluded (physically prohibited) from consuming
What is a popular model used to illustrate the concept of opportunity cost?
What does a production possibilities frontier show?
shows all possible combinations of two goods that an economy can produce in a certain period of time
What does "guns and butter" represent?
What is the difference between a need and a want?
a need is something we must have for survival while a want is something we desire
What is the difference between a good and a service?
a service is something that a person pays another to do for them while a good is anything that satisfies a persons want, also tangible
What are the 3 basic economic questions?
What to produce?
How to produce?
For whom to produce?
What does the Factor Market show on a circular flow diagram? What is being exchanged?
it shows the household and it exchanges money for goods and services
What are the 4 economic systems that are known throughout the world based on the old way of thinking?
Traditional, Command, Market, and Mixed
What are the 2 major economic systems?
Free Enterprise and Socialism
Who plays one of the most important roles in the free enterprise system by starting new businesses?
What are the 5 major characteristics of a "free enterprise"?
private property, choice, voluntary exchange, competition, and economic incentives
What is meant by "Making a decision at the margin"?
making the best additonal cost
Where do animals fall into the Factors of Production?
How can you determine a nation's economic system?
who answers the economic questions
Many believe that globalization is making the world move towards...
a single worldwide economy
What book did Adam Smith write and what did he explain in his book?
Wealth of Nations; he explained that self interest causes people to work hard and take risks which benefits society, division of labor creates greater productivity and wealth, competition keeps prices down and quality up, and government should provide national defense, a system of justice, and public works
What book did Karl Marx write and what did he explain?
Das Kapital; all value in produced goods come from labor, capitalist exploit laborers, and nations will progress through six stages of development, from primitive to pure communism
What are the major differences between free enterprise and socialism?
Free enterprise the government plays a small role in the economy, it doesn't make decisions about what goods and services will be produced or how they will be produced, and it allows prices to fluctuate. No one forces people to have anything so they don't have to buy products
Examples of positive externality?
cats keep the neighbors from getting rodents.
someone has cameras on there house and help catch the neighborhood vandal
Examples of negative externality
Neighbors leave dog poop in your yard and making your house look bad
Annoying neighbors keep you from selling your house
What did the book say about taxation as it relates to externalities?
taxation, like regulation, doesn't always have the intended effect but it does provide society with some benefits
What was the controversial Supreme Court case Kelo v.New London?
Why have laws in the US been developed?
What is a free rider and why is she/he called that?
a person who receives the benefits of a good without paying for it
How might the government negate some negative externalities?
court system, regulation, and taxation
What does the product market show on a circular flow diagram? What is being exchanged?
it shows the businesses and it pays money for factors of production
Under free enterprise and socialism, government decision makers write an economic plan.
Globalization is expanding everyone's ability to potentially sell to more people.
Some countries can produce every good they want in the quantity they would like, whereas others have to decide what goods will be produced.
In a free enterprise economic system, government plays a small role in the economy.
In a socialist economic system, government decision makers allow prices to fluctuate (go up and down).
The question of what goods will be produced must be answered because
How a society answers the three economic questions defines
its economic system
Resources are owned and controlled by private individuals in what type of economic system?
a free enterprise or market economic system
In a traditional economy, people
pass on customs, skills, and cultural beliefs from one generation to the next
expanded everyone's ability to potentially sell to more people
Offshoring refers to
work done for a company by people who live in other countries
In a socialist economic system, the government
owns and controls many of the resources
A command economy is
a particular type of socialist economic system
The two major economic systems are
free enterprise and socialism
Which of the following can not be attributed to Adam Smith's beliefs?
all value in produced goods comes from labor
Adam Smith believed
that people's actions are led by an invisible hand
The major differences between free enterprise and socialism include
ownership of resources and the government's role in the economy, economic planning and income distribution, controlling prices and honoring private property
Globalization leads to
closer connections between countries through trade
There is a strong correlation between globalization and
Critics of globalization argue that
large corporations will take over
Rationing exists because of
The opportunity cost of something is
what you give up to get the item
the cost to produce one additional unit
As the opportunity cost of college increases compared to the benefits, a person is
less likely to attend college
A production possibilities frontier shows
all possible combinations of two goods an economy can produce
If your parents offer you cash for every A on your report card, that is an example of
things that can be felt or touches are
Animals are classified as which of the following factors of production?
Scarcity exists when
there is less of a good than people would like to have
Which of the following is scarce?
D. all of the above
D. all of the above
Opportunity cost could be described as
your second choice
As the opportunity cost of a decision increases, a person will be
less likely to make such a decision
When a society spends money on national defense, there is
a trade off, since that money cannot be used for a school or a bridge
Scarcity exists because
resources are limited and wants are unlimited
High school athletes who choose not to attend college but instead select professional sports
have weighted the costs and benefits
Another word for marginal is
To an economist, capital refers to
machinery and tools
allocates products to those who are willing and able to pay
According to this textbook, an example of a nonrenewable resource is
Which of the following is a renewable resource?
C. natural gas
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