Econ 1001 Exam 1 | Actual study set |
Questions and verified Answers
Economics - ANSW-the study of how people use their scarce resources to satisfy their unlimited wants
Resources - ANSW-the inputs, or factors of production, used to produce the goods and services that
people want
consist of labor, natural resources, and entrepreneurial ability
Labor - ANSW-the physical and mental effort used to produce goods and services
Capital - ANSW-the buildings, equipment, and human skills used to produce goods and services
infrastructure
Natural Resources - ANSW-all gifts of nature used to produce goods and services
includes renewable and exhaustible resources
Entrepreneurial Ability - ANSW-the imagination required to develop a new product or process, the skill
needed to organize production, and the willingness to take the risk of profit or loss
Entrepreneur - ANSW-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
Wages - ANSW-payment to resource owners for their labor
Interest - ANSW-payment to resource owners for the use of their capital
Rent - ANSW-reward for entrepreneurial ability
sales - resource cost
Good - ANSW-a tangible (physical properties) product to satisfy human wants
Service - ANSW-an activity, or intangible product, used to satisfy human wants
examples: accounting, haircut, garbage, maintenance, teaching, banking, cedar point, kings island,
concerts
Scarcity - ANSW-occurs when the amount people desire exceeds the amount available at a zero price
Market - ANSW-a set of arrangements by which buyers and sellers carry out exchange at mutually
agreeable terms
Product Market - ANSW-a market in which a good or service is bought and sold (customers)
Resource Market - ANSW-a market in which a resource is bought and sold (business)
Circular-Flow Model - ANSW-a diagram that traces the flow of resources, products, income, and revenue
among economic decision makers
Rational Self Interest - ANSW-each individual tries to maximize the expected benefit achieved with a
given cost or to minimize the expected cost of achieving a given benefit
Marginal - ANSW-incremental, additional, or extra
used to describe a change in an economic variable
***PLUS ONE, additional***
Microeconomics - ANSW-the study of economic behavior in particular markets, such as that for
computers or unskilled labor
, Macroeconomics - ANSW-the study of the economic behavior of entire economies, as measured, for
example, by total production employment (Gross Domestic Profit; GDP)
Economic Fluctuations - ANSW-the rise and fall of economic activity relative to the long-term growth
trend of the economy
AKA Business Cycles
Economic Theory (Model) - ANSW-a simplification of reality used to make predictions about cause and
effect in the real world
The Scientific Method - ANSW-...begin with a question...
Variable - ANSW-a measure, such as price or quantity, that can take on different values at different times
Other-Things-Constant Assumption - ANSW-the assumption, when focusing on the relation among key
economic variables, that other variables remain unchanged, in Latin, Ceteris Paribus
Behavioral Assumption - ANSW-an assumption that describes the expected behavior of economic
decision makers
what motivates them
Hypothesis - ANSW-a theory about how key variables relate to each other
Positive Economic Statement - ANSW-a statement that can be proved or disproved by reference to facts
Normative Economic Statement - ANSW-a statement that reflects an opinion, which cannot be proved or
disproved by reference to the facts
Association-is Causation Fallacy - ANSW-the incorrect idea that if two variables are associated in time,
one must necessarily cause the other
Fallacy of Composition - ANSW-the incorrect belief that what is true for the individual, or part, must
necessarily be true for the group, or the whole
Secondary Effects - ANSW-unintended consequences of economic actions that may develop slowly over
time as people react to events
Opportunity Cost - ANSW-the value of the best alternative forgone when an item or activity is chosen
"opportunity lost"
monetary and non-monetary aspects
consider: value of the best alternative forgone
work vs. college
Law of Comparative Advantage - ANSW-the individual, firm, region, or country with the lowest
opportunity cost of producing a particular good should specialize in that
Absolute Advantage - ANSW-the ability to make something using fewer resources than other producers
use
Division of Labor - ANSW-breaking down the production of a good into separate tasks increases
productivity)
Specialization of Labor - ANSW-workers specialize in a task in the production process at which they are
most efficient
Laissez-Faire - ANSW-let it be
government should keep their hands off the economy
Mercantilism - ANSW-theory that they existed to benefit the mother country
Questions and verified Answers
Economics - ANSW-the study of how people use their scarce resources to satisfy their unlimited wants
Resources - ANSW-the inputs, or factors of production, used to produce the goods and services that
people want
consist of labor, natural resources, and entrepreneurial ability
Labor - ANSW-the physical and mental effort used to produce goods and services
Capital - ANSW-the buildings, equipment, and human skills used to produce goods and services
infrastructure
Natural Resources - ANSW-all gifts of nature used to produce goods and services
includes renewable and exhaustible resources
Entrepreneurial Ability - ANSW-the imagination required to develop a new product or process, the skill
needed to organize production, and the willingness to take the risk of profit or loss
Entrepreneur - ANSW-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
Wages - ANSW-payment to resource owners for their labor
Interest - ANSW-payment to resource owners for the use of their capital
Rent - ANSW-reward for entrepreneurial ability
sales - resource cost
Good - ANSW-a tangible (physical properties) product to satisfy human wants
Service - ANSW-an activity, or intangible product, used to satisfy human wants
examples: accounting, haircut, garbage, maintenance, teaching, banking, cedar point, kings island,
concerts
Scarcity - ANSW-occurs when the amount people desire exceeds the amount available at a zero price
Market - ANSW-a set of arrangements by which buyers and sellers carry out exchange at mutually
agreeable terms
Product Market - ANSW-a market in which a good or service is bought and sold (customers)
Resource Market - ANSW-a market in which a resource is bought and sold (business)
Circular-Flow Model - ANSW-a diagram that traces the flow of resources, products, income, and revenue
among economic decision makers
Rational Self Interest - ANSW-each individual tries to maximize the expected benefit achieved with a
given cost or to minimize the expected cost of achieving a given benefit
Marginal - ANSW-incremental, additional, or extra
used to describe a change in an economic variable
***PLUS ONE, additional***
Microeconomics - ANSW-the study of economic behavior in particular markets, such as that for
computers or unskilled labor
, Macroeconomics - ANSW-the study of the economic behavior of entire economies, as measured, for
example, by total production employment (Gross Domestic Profit; GDP)
Economic Fluctuations - ANSW-the rise and fall of economic activity relative to the long-term growth
trend of the economy
AKA Business Cycles
Economic Theory (Model) - ANSW-a simplification of reality used to make predictions about cause and
effect in the real world
The Scientific Method - ANSW-...begin with a question...
Variable - ANSW-a measure, such as price or quantity, that can take on different values at different times
Other-Things-Constant Assumption - ANSW-the assumption, when focusing on the relation among key
economic variables, that other variables remain unchanged, in Latin, Ceteris Paribus
Behavioral Assumption - ANSW-an assumption that describes the expected behavior of economic
decision makers
what motivates them
Hypothesis - ANSW-a theory about how key variables relate to each other
Positive Economic Statement - ANSW-a statement that can be proved or disproved by reference to facts
Normative Economic Statement - ANSW-a statement that reflects an opinion, which cannot be proved or
disproved by reference to the facts
Association-is Causation Fallacy - ANSW-the incorrect idea that if two variables are associated in time,
one must necessarily cause the other
Fallacy of Composition - ANSW-the incorrect belief that what is true for the individual, or part, must
necessarily be true for the group, or the whole
Secondary Effects - ANSW-unintended consequences of economic actions that may develop slowly over
time as people react to events
Opportunity Cost - ANSW-the value of the best alternative forgone when an item or activity is chosen
"opportunity lost"
monetary and non-monetary aspects
consider: value of the best alternative forgone
work vs. college
Law of Comparative Advantage - ANSW-the individual, firm, region, or country with the lowest
opportunity cost of producing a particular good should specialize in that
Absolute Advantage - ANSW-the ability to make something using fewer resources than other producers
use
Division of Labor - ANSW-breaking down the production of a good into separate tasks increases
productivity)
Specialization of Labor - ANSW-workers specialize in a task in the production process at which they are
most efficient
Laissez-Faire - ANSW-let it be
government should keep their hands off the economy
Mercantilism - ANSW-theory that they existed to benefit the mother country
