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Econ 1 Test
Basic Economic Concepts
| Question | Answer |
|---|---|
| What is scarcity? | A situation that exists when there are not enough resources to meet human wants, |
| What is economics? | The study of how people seek to satisfy their needs and wants by making choices. |
| What are the 3 key economic questions? | What, how, and for whom will it be produced for. |
| What is land? | Natural resources used to produce goods and services. |
| What is labor? | All the human time, effort, and talent used to produce goods and services. |
| What is capital? | Any human-made resources that is used to produce other goods and services. |
| What is an entrepreneur? | Individuals who use the other factors of production to produce other goods and services. |
| What do the letters INSTAAFL represent? What does it mean? | There is no such thing as a free lunch. Something always has to be given up to be given something. |
| What are trade-offs? | All the alternatives that we give up whenever we choose one course of action over another. |
| What is an opportunity cost? | The next best alternative given up when a choice is made. |
| Production Possibilities Curve (Frontier) | Shows alternative ways to use resources. |
| What economic concept does the PPC represent? | Opportunity costs |
| What does a point on the PPC represent? | A point on which all the resources are fully utilized. |
| What does a point inside the PPC represent? | Underutilization of resources |
| Why is the PPC owed out? | The law of increasing opportunity costs |
| What does a point outside the PPC represent? | Unattainable production with the current resources available. |
| How do you compute the cost of choosing one combination over another? What is this called? | Opportunity costs |
| How does a country promote economic growth? | Trade. new source of resource, technology, and education. |
| What is a traditional economy? | Traditions, beliefs and customs that determine the goods that are created. |
| What is a command economy? | Government owns most property resources |
| What is a market economy? | Individuals select the choices that make them happiest, given the information available at the time of a decision. |
| What is a centrally planned economy? | An economic system in which decisions are made by a central authority rather than by market participates. |
| What is a mixed economy? | An economic system which both the public and private sector direct the economy. |
| What is capitalism? | Protecting private property, establishing an environment appropriate to the operation of the market system. |
| What is the role of government in capitalism? | To maintain law and order in a country, make national defense stronger and regulate money supply |
| What is the most important factor in choosing a good or service for a consumer? | To make sure they want them and if enough can be produced |
| What is consumer sovereignty? | The idea that consumers have the ultimate control over what is produced. |
| What is specialization? | A situation in which people concentrate their efforts in the activities that they do best |
| Who was Adam Smith? | A British philosopher, explained how free markets functioned, believed free markets benefited the welfare of a society and would make a nation wealthy. |
| What is Adam Smith's Invisible Hand theory? | A free market would lead to fair prices, more choices, and the efficient use of resources, and economic growth. |
Created by:
trinityhogge
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