Micro-Exam 1

Front 1

economy

Back 1

a system for coordinating society's productive activities

Front 2

economics

Back 2

the social science that studies the production, distribution, and consumption of goods and services

Front 3

market economy

Back 3

an economy in which decisions about production and consumption are made by individual producers and consumers

Front 4

invisible hand

Back 4

refers to the way in which the individual pursuit of self-interest can lead to good results for society as a whole

Front 5

microeconomics

Back 5

the branch of economics that studies how people make decisions and how these decisions interact

Front 6

market failure

Back 6

when the individual pursuit of self-interest leads to bad results for society as a whole

Front 7

recession

Back 7

a downturn in the economy

Front 8

macroeconomics

Back 8

the branch of economics that is concerned with overall ups and downs in the economy

Front 9

economic growth

Back 9

the growing ability of the economy to produce goods and services

Front 10

individual choice

Back 10

the decision by an individual of what to do, which necessarily involves a decision of what not to do

Front 11

resource

Back 11

anything that can be used to produce something else

Front 12

scarce

Back 12

there is not enough of the resources available to satisfy all the various ways a society wants to use them

Front 13

opportunity cost

Back 13

what you must give up in order to get something

Front 14

trade-off

Back 14

compare the costs with benefits of something

Front 15

marginal decisions

Back 15

decisions to do a bit more or a bit less of an activity

Front 16

marginal analysis

Back 16

the study of decisions to do a bit more or a bit less of an activity

Front 17

incentive

Back 17

anything that offers rewards to people who change their behavior

Front 18

interaction of choices

Back 18

my choices affect your choices, and vice versa

Front 19

trade

Back 19

provide goods and services to others and receive goods and services in return

Front 20

gains from trade

Back 20

people can get more of what they want through trade than they could if they tried to be self-sufficient

Front 21

specialization

Back 21

each person specializes in the task that he or she is good at performing

Front 22

equilibrium

Back 22

when no individual would be better off doing something different

Front 23

efficient

Back 23

taking all opportunities to make some people better off without making other people worse off

Front 24

equity

Back 24

everyone gets his or her fair share

Front 25

model

Back 25

a simplified representation of a real situation that is used to better understand real-life situations

Front 26

other things equal assumption

Back 26

all other relevant factors remain unchanged

Front 27

production possibility frontier

Back 27

illustrates the trade-offs facing an economy that produces only two goods. It shows the maximum quantity of one good that can be produced for any given quantity produced of the other

Front 28

factors of production

Back 28

resources used to produce goods and services

Front 29

technology

Back 29

the technical means for producing goods and services

Front 30

comparative advantage

Back 30

occurs in producing a good or service if the opportunity cost of producing the good or service is lower for that individual than for other people

Front 31

absolute advantage

Back 31

occurs in an activity if an individual can do better than other people

Front 32

barter

Back 32

when people directly exchange goods and services that they have for goods and services that they want

Front 33

circular-flow diagram

Back 33

represents the transactions in an economy by flows around a circle

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household

Back 34

a person or a group of people that share their income

Front 35

firm

Back 35

an organization that produces goods and services for sale

Front 36

markets for goods and services

Back 36

where firms sell goods and services that they produce to households

Front 37

factor markets

Back 37

where firms buy the resources they need to produce goods and services

Front 38

income distribution

Back 38

the way in which total income is divided among the owners of the various factors of production

Front 39

positive economics

Back 39

the branch of economic analysis that describes the way the economy actually works

Front 40

normative economics

Back 40

makes prescriptions about the way the economy should work

Front 41

forecast

Back 41

a simple prediction of the future