ECON-2100 EXAM 1 STUDY GUIDE (CH. 1, 2, & 4)
Economics - Answer -study of how people use scarce resources to satisfy unlimited
wants
Entrepreneur - Answer -a profit-seeking decision maker who starts with an idea,
organizes an enterprise to bring that idea to life, and assumes the risk of the operation
Goods - Answer -things you can see/feel/touch, require scarce resources to produce,
satisfy human wants
Services - Answer -Intangible activities that are performed by other people for money;
productive acts that satisfy economic wants
Rational self-interest - Answer -individuals trying to maximize the expected benefit or
minimize the expected cost
Marginal - Answer -Incremental, additional, or extra; used to describe a change in an
economic variable
Microeconomics - Answer -study of economic behavior in particular markets
Factors of production are - Answer -labor, capital, natural resources, and
entrepreneurial ability
opportunity cost - Answer -the value of the best alternative forgone when an item or
activity is chosen
law of comparative advantage - Answer -the individual, firm, region, or country with the
lowest opportunity cost of producing a particular good should specialize in that good
division of labor - Answer -breaking down the production of a good into separate tasks
Production Possibilities Frontier (PPF) - Answer -A curve showing alternative
combinations of goods that can be produced when available resources are used
efficiently; a boundary line between inefficient and unattainable combinations
law of increasing opportunity cost - Answer -to produce more of one good, a
successively larger amount of the other good must be sacrificed
Invisible Hand Theory - Answer -Adam Smith's theory that the actions of independent,
self-interested buyers and sellers will often result in the most efficient allocation of
resources
Economics - Answer -study of how people use scarce resources to satisfy unlimited
wants
Entrepreneur - Answer -a profit-seeking decision maker who starts with an idea,
organizes an enterprise to bring that idea to life, and assumes the risk of the operation
Goods - Answer -things you can see/feel/touch, require scarce resources to produce,
satisfy human wants
Services - Answer -Intangible activities that are performed by other people for money;
productive acts that satisfy economic wants
Rational self-interest - Answer -individuals trying to maximize the expected benefit or
minimize the expected cost
Marginal - Answer -Incremental, additional, or extra; used to describe a change in an
economic variable
Microeconomics - Answer -study of economic behavior in particular markets
Factors of production are - Answer -labor, capital, natural resources, and
entrepreneurial ability
opportunity cost - Answer -the value of the best alternative forgone when an item or
activity is chosen
law of comparative advantage - Answer -the individual, firm, region, or country with the
lowest opportunity cost of producing a particular good should specialize in that good
division of labor - Answer -breaking down the production of a good into separate tasks
Production Possibilities Frontier (PPF) - Answer -A curve showing alternative
combinations of goods that can be produced when available resources are used
efficiently; a boundary line between inefficient and unattainable combinations
law of increasing opportunity cost - Answer -to produce more of one good, a
successively larger amount of the other good must be sacrificed
Invisible Hand Theory - Answer -Adam Smith's theory that the actions of independent,
self-interested buyers and sellers will often result in the most efficient allocation of
resources
