Economics Chapter 1

Front 1

ECONOMICS CHAPTER 1

Back 1

ECONOMICS CHAPTER 1

Front 2

Define economics

Back 2

the study of how people choose to use their limited resources to produce, exchange, and comsume goods and services

Front 3

Economics is the study of;

Back 3

the decision process in choosing the most efficient way to allocate scarce resources to satisfy our wants to maximum extent possible

Front 4

Who is involved in economics

Back 4

individually, firms or countries

Front 5

Who has the largest economy of the world

Back 5

USA

Front 6

Define scarcity

Back 6

limited resources trying to satisfy unlimited wants: eg: Jamestown had "smiths" but no farmers

Front 7

Define per capita output or per capita GDP

Back 7

basic measure of standard living

Front 8

How do you calculate or compute per capita output

Back 8

divide total output by the population

Front 9

Fill in blank: _______ _______ output is a basic measure of standard living

Back 9

per capita

Front 10

The Jamestown colonists were drawn to the New World by:
a. economic motivation
b. desire for political freedom
c. desire for religious freedom
d. none of the above

Back 10

a - economic motivation

Front 11

In 1960 GDP for the US was $2,502 billion (measured at 2000 price level) and the population was 180.780 million. Per capita GDP in 1960 was:
a. $7047
b. $12,700
c. $13,840
d. $28380

Back 11

c - $13,840

Front 12

Most of theUS economic growth between 1790 and 1860 was caused by:
a. central planning by the US government
b. the development of computers
c. growth in industrial productivity due to the industrial revolution
d. imporvements in agricultural productivity

Back 12

d- imporvements in agricultural productivity

Front 13

Between 1860 adn 1929, per capita output in the US:
a. quintupled
b. doubled
c. increased by 50%
d. stayed same

Back 13

b - doubled

Front 14

Copared to 1790, the standard of living today is;
a. about the same
b. nearly 3 times as high
c. about 5 times as high
d. about 15 times as high

Back 14

d - about 15 times as high

Front 15

In the 20th century, the poverty rate in the US:
a. decreased from 90%-12%
b. decreased from 50%-10%
c. decreased from 20%-15%
d. stayed same

Back 15

a - decreased from about 90% to 12%

Front 16

In the 20th century life expectancy in the US:
a. remained steady
b. decreased slightly due to the rising murder rate
c. increased by almost 10 years
d. increased by almost 30 years

Back 16

d- increased by almost 30 years

Front 17

Per capita output in the US in 2004 was:
a. $28,700
b. $31,500
c. $40,100
d. $48,700

Back 17

c - $40,100

Front 18

Of the 30 largest national economies, the one with the lowerst per capita GDP in 2004 was:
a. Pakistan
b. Egypt
c. India
d. Indonesia

Back 18

a - Pakistan

Front 19

Of Japan, Germany, France and Canada the one with teh highest per capita GDP in 2004 was:

Back 19

Canada

Front 20

In 2004 the sum of GDP for Japan, Germany and the United Kingdom, France, Canada and Mexico was:
a. about triple of US
b. about double of US
c. about 1 1/2 X's US
d. almost as great as US

Back 20

d - almost as great as US

Front 21

Describe the initial economic struggles of the Jamestown colonists

Back 21

struggled to prduce enough output to sustain life. 105 original colonist, only38 alive when 2nd group arrived. Then, 214 but 1 yr later only 60 alive.

Front 22

Describe the economic cost of the Civil War

Back 22

600,000 died. 500,000 wounded. Total cost of war estimated at $6.7 billion - about double of national income of 1860

Front 23

List in order the four largest national economies in 2004:

Back 23

1. USA
2. China
3. Japan
4. India

Front 24

What is the basic economic problem

Back 24

scarcity

Front 25

What is one side of the problem of scarcity

Back 25

Human wants are unlimited: strandad on an island surrounded by coconut milk and honey but you will want chocolate...

Front 26

What is the second side of the problem of scarcity

Back 26

Even in the most productive societies it isn't possible to produce all of everything that everyone wants

Front 27

Define Scarcity as outlined in section 1:2

Back 27

the problem that human wants exceed the production possible with the limited resources available

Front 28

What is the fundamental focus of economics

Back 28

how individuals and societies attempt to deal with the problem of scarcity

Front 29

Define Economocs as outlined in section1:2

Back 29

the study of how individuals and societies use their limited resources to try to satisfy their unlimited wants

Front 30

What is the basic goal in dealing with the problem of scarcity

Back 30

produce as much consumer satisfaction as possible with the limited resources available. Impossible to satisfy all human wants

Front 31

Define resources

Back 31

the inputs that make production possible

Front 32

Name the four broad categories that make up resources

Back 32

1. labor
2. land
3. capital
4. enterpreneurship

Front 33

Define labor as it pertains to resources

Back 33

physical and mental efforts that people contribute to production, depends largely on amount of human capital the the labor force develops.

Front 34

Define human capital

Back 34

developed ability that increases a person's productivity; primarily thru education, training and work experience

Front 35

Define Land as it pertains to resources

Back 35

the naturally occuring resources such as unimproved land, minerals, fossil fuels, forests, water and weather

Front 36

Define capital as it pertains to resources

Back 36

produced goods that are used in production of other goods. Hwy's, harbors, airports, railroads, factories, warehouses, machinery, etc.

Front 37

Define enterpreneurship as it pertains to resources

Back 37

special skill involved in organizing labor, land and capital for production. Entrepreneurs start new business, new production techniques, & new products.

Front 38

What is the motivation of entrepreneurs

Back 38

profit-maximization

Front 39

According to Adam Smith will the resource owner's pursuit of self-interest benefit or serve the best interest of society?

Back 39

Yes, it will generally. By pursuing his own interst he frequently promotes that of society more effectually than when he really intends to promote it

Front 40

Why does the resource owner's pursiut of self-interest generally serve the best interst of society? (2 reasons)

Back 40

1. Resource owners will direct their resources to the use that is most highly valued by consumers. 2. Resource owners will use their resources as efficiently as possible

Front 41

Define Opportunity cost

Back 41

the value of the best alternative surrendered when a choice is made. If resources are used to make good A, then they aren't availble to make good b. When Cindy quit the Sonics to join Army, her opportunity cost was $ she could've had w/Sonics

Front 42

What is the primary rationing device in the US economy

Back 42

dollar price, meaning that resources will be rationed to the use that is most highly valued by consumers.

Front 43

How are economic decisions made

Back 43

comparing the marginal (extra, additional) benefits of a choice w/marginal costs.

Front 44

List the 4 scientific thinking methods

Back 44

1. realizing tha association doesn't necessarily indicate causation. 2. Avoiding the fallacy of composition. 3. Distinguishing between positive and normative statements. 4. Assuming ceteris paribus when examing the relationship between variables

Front 45

Define what is meant by realizing that association doens't necessarily indiace causation in referene to scientific thinking

Back 45

Association: I studied more & my test grade improvved.
Causation: test grade improved
Association: I painted my toenails blue & my test grade improved. No connection

Front 46

Define avoiding the fallacy of composition as it relates to scientific thinking

Back 46

The fallacy is an idea that what is true for one must be true for the group - which is not necessarily true

Front 47

Discuss distinguishing between positive statements and normative statements as it pertains to scientific thinking

Back 47

Positive: describe the way things are, can be tested for accuracy.
Normative: propse way things ought to be, express value judgments & cannot be tested for accuracy

Front 48

Define assuming ceteris paribus when examining the relationship between variables as it pertains to scientific thinking

Back 48

means "all other things held constant" Other variables must be held constant if we are to arrive at actual relationship between the varibles we are examining

Front 49

Define macroeconomics

Back 49

branch of economics that focuses on overall economic behavior. Inflation, unemployment, economic growth, budget deficits, trade deficits, etc.

Front 50

Define microeconomics

Back 50

branch of economics that focuses on components of the economy. Households, firms, markets, specific industried, etc.

Front 51

Define graphs

Back 51

illustrat the relationship between 2 variables.

Front 52

What does an upward sloping curve indicate on a graph

Back 52

direct relationship between the variables

Front 53

What does a downward sloping curve indicated on a graph

Back 53

an inverse relationship between the variables

Front 54

What does a horizontal curve or a vertical curve indicate on a graph

Back 54

the variables are unrelated to each other

Front 55

Know that the slope of a curve is the ratio of the vertical change to the horizontal change as the graph is read from left to right

Back 55

Slope = Change in Y varible divided by Change in X variable = (Y2-Y1) divided by (X2-X1)

Front 56

Fill in the blank: ________ is the problem that human wants exceed the production possible with the limited resources available

Back 56

scarcity

Front 57

Fill in the blank: _________ is the study of how individuals and societied use their limited resources to try to satisfy their unlimied wants

Back 57

Economics

Front 58

Fill in the blank: _________ are the inputs that make production possible

Back 58

Resources

Front 59

Fill in the blank: _________ refers to the physical and mental efforts that people contribute to production

Back 59

labor

Front 60

Fill in the blank: _________ ________ is developed ability that increases a person's productivity

Back 60

human capital

Front 61

Fill in the blank: _________ referes to the naturally occurring resources

Back 61

land

Front 62

Fill in the blank: _________ refers to produced goods that are used in the production of other goods

Back 62

capital

Front 63

Fill in the blank: _________ is the special skill involved in organizing labor, land and capital for production

Back 63

entrepreneurship

Front 64

Fill in the blank: _________ cost is the value of the best alternative surrendered when a choice is made

Back 64

opportunity

Front 65

Fill in the blank: _________ statements claim to describe the way things are

Back 65

positive

Front 66

Fill in the blank: _________ statements propose the way things ought to be

Back 66

Normative

Front 67

Fill in the blank: _________ focuses on overall economic behavior

Back 67

macroeconomics

Front 68

Fill in the blank: _________ focuses on components of the economy

Back 68

microeconomics

Front 69

Fill in the blank: _________ illustrate the relationship between 2 variables

Back 69

graphs

Front 70

On a graph, an upward sloping curve indicates a(n) _________ relationship between the variables

Back 70

direct

Front 71

The ______ of a curve is the ratio of the vertical change to the horizontal change as the graph is read from left to right

Back 71

slope

Front 72

The basic economic problem is scarcity because
a. human wants are unlimited and resources are limited
b. there are never enough jobs for all the people who want to work
c. there is never enough money to consume what we want
d. human wants are limited and resources are unlimited

Back 72

a - human wants are unlimited and resources are limited

Front 73

If the US could triple its per capita income:
a. all economic problems would be solved
b. everyone could consume all that they wanted
c. the basic economic problem would still be scarcity
d. both a and b

Back 73

c- the basic economic problem would still be scarcity

Front 74

The basic gaol in dealing withe the problem of scarcity is:
a. to produce as much consumer satisfaction as possible with the limited resources available
b. to decrease human wants until they are consistent with the resources available
c. to satisfy all human wants
d. both b and c

Back 74

a - to produce as much consumer staisfaction as possible w/limited resources available

Front 75

____ refers to the natyurally occuring resources
a. labor
b. land
c. capital
d. entrepreneurship

Back 75

b - land

Front 76

In a competitive market the self-interest of the resource owners will cause resources to be directed:
a. to the use that is most highly valued by consumers
b. to a use that harms society
c. to their most convenient use
d. in a random way

Back 76

a - to the use that is most highly valued by consumers

Front 77

Using dollar price as the rationing device means:
a. that resources will be rationed to the use that is most highly valued by consumers
b. that goods will be rationed to the consumers who are willing and able to pay the most
c. both of the above
d. none of the above

Back 77

c - both of the above

Front 78

The optimal level of an activity occurs where
a. the marginal benefit is maximized
b. The excess of marginal benefit over marginal cost is maximized
c. the marginal benefit and the marginal cost are equal
d. either a or b

Back 78

c - the marginal benefit and the marginal cost are equal

Front 79

"If I have more money, I will be better off. Therefore, if everyone has more money everyone will be better off." this is an example of:
a. the association-causation issue
b. the fallacy of composition
c. the ceteris paribus assumption
d. all of the above

Back 79

b - the fallacy of composition

Front 80

Which of hte following is a normative statement
a. The unemployment rate in March 2006 was 5.1%
b. American and Europena companies employ over 2 mill workder at call centers in India
c. The federal government should fine US companies that outsource jobs to foreign countires
d. None of the above

Back 80

c - The federal government should fine US companies that outsource jobs to foreign countires

Front 81

Each morning Homer buys 2 donuts. Yesterday he received a salary increase. Today the price of donuts was up by .05 and he bought 3. Does this prove that people will buy more donuts as the price of donuts increases
a. yes, it is simple cause and effect
b. no, only proves that he wil buy more as the price increases - fallacy of ocmposition
c. no, since he received a salary increase we have failed the ceteris paribus assumption. All things are not constant
d. Doh!

Back 81

c - no, since he received a salary increase we have failed the ceteris paribus assumption. All things are not constant

Front 82

(Card *)


When the value of eh X variable is 4, the value of hte Y variable is 2. When the value of hte X variable is 8, the value of the Y variable is 6. A line connecting the 2 points just described would run from points:
a. A-B
b. B-C
c. C-D
d. B-D

Back 82

d - B-D

Front 83

The slope of the curve connecting the 2 points described on card * is:
a. 1/2
b. 1
c. 3
d. -2

Back 83

b - 1

Front 84

The 2 points described on card * indicate a(n):
a. direct relationship
b. inverse relationship
c. independent relationship

Back 84

a - a direct relationship

Front 85

If the value of one variable on a graph remains the same while the value of the other variable increases there is;
a. direct relationship
b. no relationship
c. an inverse relationship
d. none of the above

Back 85

b - no relationship

Front 86

List and define the 4 categories of resources:

Back 86

1. labor: the physical and mental efforts people contribute to production
2. land: naturally occurring resources
3. Capital: produced goods used in production of other goods
4. Entrepreneurship: special skill involved in organizing labor, land & capital for production

Front 87

Explain the role of entrepreneurs in the economy

Back 87

organize labor, land and capital fro production. Starn new businesses, deveop new prodcution techniques and introduce new products. Generally motivated by profit-maximization, also bear risk of loss.

Front 88

Explain why resources owner's pursuit of self-interest will generally serve the best interest of society

Back 88

most have a self-interest to generate maximum profit from use of their resources. In competitive markets, this pursuit of profit-max will lead the resources owners towards either resources that is most highly valued or use resources as effecietnly as possible