What is the definition of capital goods?

Man-made assets that aid in production.

What is the purpose of economic models and theories?

To serve as simplified representations of complex economic realities to make predictions

What does the assumption of Rational Self-Interest imply in economic theory?

It implies that decision-makers aim to maximize benefits.

According to the principle of marginal analysis, when should you change the current situation?

If the marginal benefit exceeds the marginal cost

In the example of calling in an extra work hour, what is the marginal cost?

The time you normally spend on leisure or studying, and possible additional tiredness later on.

What is the decision process described in the worksheet? Fill in the blank: You compare the extra $15 (and any additional benefits) against the value of your lost leisure time and increased fatigue. If the extra income and benefits outweigh the personal costs, you decide to work that additional hour.

You compare the extra $15 (and any additional benefits) against the value of your lost leisure time and increased fatigue. If the extra income and benefits outweigh the personal costs, you decide to work that additional hour.

Which of the following best describes Microeconomics? Options: Study of overall economic conditions and aggregate trends, Study of individual decision-makers (households and firms) and specific market interactions, Study of government policies, Study of international trade

Study of individual decision-makers (households and firms) and specific market interactions

Which of the following is an example of Macroeconomics? Options: How a change in the price of coffee affects consumer demand How fiscal policy impacts the national economy How a firm sets its prices How households decide what to buy

How fiscal policy impacts the national economy

What is the role of households in the two-sector circular flow model?

Supply the factors of production such as labor, capital, land, and entrepreneurship to firms.

What is the income received by households in return for their contributions? Options: Wages, rent, interest, and profits; Taxes and subsidies; Government grants and donations; Sales revenue from businesses

Wages, rent, interest, and profits

What is the role of firms in the two-sector circular flow model?

Use the factors of production provided by households to produce goods and services.

How do firms earn revenue in the two-sector circular flow model?

By selling their products in the product market.

What is the definition of a market according to the worksheet?

A platform where buyers and sellers interact, consolidating demand and supply to determine price and quantity.

In the factor market, what do households offer to firms?

Households offer their labor and other resources to firms.

In the factor market, firms compensate households with ________.

wages, rent, interest, and profits

Understanding opportunity cost is important in decision-making because:

It helps evaluate the benefits of the next best alternative.

Every economic system must answer three fundamental questions. What are they? 1. What goods will be produced? 2. How will these goods be produced? 3. For whom will these goods be produced?

1. What goods will be produced? 2. How will these goods be produced? 3. For whom will these goods be produced?

In a pure market economy, who owns all resources?

All resources are privately owned.

What is a critical requirement for a pure market economy to function effectively?

Protection of property rights is essential.

List one challenge faced by a pure market economy.

Lack of government intervention

In a pure command economy, who decides what to produce, how to produce, and for whom?

Central planners decide what to produce, how to produce, and for whom, based on government priorities rather than consumer preferences.

Define the Production Possibilities Frontier (PPF).

The PPF is a curve that shows the various combinations of two goods that can be produced with a fixed amount of resources.

Which of the following is an assumption of the Production Possibilities Frontier (PPF)? Options: Unlimited resources, Constant technology, resources, and production rules during the period, Variable time period, Increasing technology

Constant technology, resources, and production rules during the period

What does the Law of Increasing Opportunity Cost state?

As more of one good is produced, increasingly larger amounts of the other good must be sacrificed.

Interpreting the PPF: What do points on the PPF represent?

Efficient production—resources are fully employed

Interpreting the PPF: Points outside the PPF represent ________.

unattainable production levels given current resources and technology

Shifts in the PPF: What does an outward shift in the PPF signify?

Economic growth, allowing more goods to be produced than before

Unit 1 Economics Final Exam Review Flashcards

Student preview

81 questions

Show all answers

1.

FLASHCARD QUESTION

Front

What is the definition of scarcity?

Back

Unlimited human wants vs. a limited supply of resources.

2.

FLASHCARD QUESTION

Front

What is the implication of scarcity?

Back

Every choice involves trade-offs because resources are finite.

3.

FLASHCARD QUESTION

Front

Fill in the blank: Human resources are efforts (both physical and mental) provided by _____

Back

people

4.

FLASHCARD QUESTION

Front

Which of the following is an example of a human resource? Your ability to work, think, and create. Machinery. Solar energy. A car.

Back

Your ability to work, think, and create.

5.

FLASHCARD QUESTION

Front

What are natural resources?

Back

"Gifts of nature" that can be used for production.

6.

FLASHCARD QUESTION

Front

Which of the following is a renewable resource? Solar energy, Fossil fuels, Machinery, Haircuts

Back

Solar energy

7.

FLASHCARD QUESTION

Front

Exhaustible resources are limited and can be depleted.

Back

True

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