, scarcity - CORRECT ANSWERS-A situation in which unlimited wants exceed the limited
resources available to fulfill those wants
economics - CORRECT ANSWERS-the study of the choices people make to attain their
goals, given their scarce resources
Three Key Economic Ideas - CORRECT ANSWERS-1. People are rational
2. People respond to economic incentives
3. Optimal decisions are made at the margin
marginal benefit - CORRECT ANSWERS-the additional benefit to a consumer from
consuming one more unit of a good or service
marginal cost - CORRECT ANSWERS-the cost of producing one more unit of a good
(change in total cost/ change in quantity)
Trade-off - CORRECT ANSWERS-the idea that, because of scarcity, producing more of
one good or service means producing less of another good or service
opportunity cost - CORRECT ANSWERS-the highest-valued alternative that must be
given up to engage in an activity
whatever must be given up to obtain some item
centrally planned economy - CORRECT ANSWERS-an economy in which the
government decides how economic resources will be allocated
market economy - CORRECT ANSWERS-an economy in which the decisions of
households and firms interacting in markets allocate economic resources
mixed economy - CORRECT ANSWERS-An economy in which most economic
decisions result from the interaction of buyers and sellers in markets but in which the
government plays a significant role in the allocation of resources.
productive efficiency - CORRECT ANSWERS-a situation in which a good or service is
produced at the lowest possible cost
allocative efficiency - CORRECT ANSWERS-A state of the economy in which
production is in accordance with consumer preferences; in particular, every good or
service is produced up to the point where the last unit provides a marginal benefit to
society equal to the marginal cost of producing it
voluntary exchange - CORRECT ANSWERS-a situation that occurs in markets when
both the buyer and the seller of a product are made better off by the transaction
Equity - CORRECT ANSWERS-the fair distribution of economic benefits (there is often
a trade off between efficiency and equity)
resources available to fulfill those wants
economics - CORRECT ANSWERS-the study of the choices people make to attain their
goals, given their scarce resources
Three Key Economic Ideas - CORRECT ANSWERS-1. People are rational
2. People respond to economic incentives
3. Optimal decisions are made at the margin
marginal benefit - CORRECT ANSWERS-the additional benefit to a consumer from
consuming one more unit of a good or service
marginal cost - CORRECT ANSWERS-the cost of producing one more unit of a good
(change in total cost/ change in quantity)
Trade-off - CORRECT ANSWERS-the idea that, because of scarcity, producing more of
one good or service means producing less of another good or service
opportunity cost - CORRECT ANSWERS-the highest-valued alternative that must be
given up to engage in an activity
whatever must be given up to obtain some item
centrally planned economy - CORRECT ANSWERS-an economy in which the
government decides how economic resources will be allocated
market economy - CORRECT ANSWERS-an economy in which the decisions of
households and firms interacting in markets allocate economic resources
mixed economy - CORRECT ANSWERS-An economy in which most economic
decisions result from the interaction of buyers and sellers in markets but in which the
government plays a significant role in the allocation of resources.
productive efficiency - CORRECT ANSWERS-a situation in which a good or service is
produced at the lowest possible cost
allocative efficiency - CORRECT ANSWERS-A state of the economy in which
production is in accordance with consumer preferences; in particular, every good or
service is produced up to the point where the last unit provides a marginal benefit to
society equal to the marginal cost of producing it
voluntary exchange - CORRECT ANSWERS-a situation that occurs in markets when
both the buyer and the seller of a product are made better off by the transaction
Equity - CORRECT ANSWERS-the fair distribution of economic benefits (there is often
a trade off between efficiency and equity)
