Terms For Economics Chapters 1-3

Front 1

/What are the "Factors of Production"

Back 1

-Land (Including natural resources)
-Labor (number and skills of workers)
-Capital (Machinery, buildings, networks)
-Entrepreneurship (skill in creating products, services, and processes)

Front 2

What are the Basic Ingredients of Production?

Back 2

Factors of Production

Front 3

True or False?
The more factors of production we have, the more we can produce in a given period of time.

Back 3

TRUE

Front 4

Define "Scarcity of Resources"

Back 4

A situation where our desires for goods and services exceed our capacity to produce them.

Front 5

________: Our available resources always fall short of our output desires.

Back 5

Scarcity of Resources

Front 6

Define "Opportunity Cost"

Back 6

the sacrifice of a next best alternative.

Front 7

Example of "Opportunity Cost"

Back 7

The rational thing to do is to weigh the benefits of doing your homework against the implied opportunity cost, and then make a choice.

Front 8

Economics

Back 8

the study of how best to allocate scarce resources among competing uses.

Front 9

Macroeconomics

Back 9

the study to understand and improve the performance of the economy as a whole. total output, employment, and prices.

Front 10

Microeconomics

Back 10

The study of individual behavior like firms, and government agencies that actually make up the larger economy.

Front 11

Three Big Economic Questions

Back 11

What to produce?
How to produce?
For whom to produce?

Front 12

"What to produce?"

Back 12

Because wants exceeds resources, we have to decide WHAT we want most, sacrificing less desired activities and goods.

Front 13

"How to produce?"

Back 13

to find an optimal method of producing goods and services.

Front 14

"For whom to produce?"

Back 14

focuses on how an economy's output is distributed across members of society.

Front 15

(Mechanisms of Choice)
Political Process

Back 15

The US congress makes all of our decisions on what to produce and how much to produce.

Front 16

(Mechanisms of Choice)
Market Mechanism

Back 16

the use of market prices and sales to signal desired outputs.

(to know what to sell determined by sales

Front 17

(Mechanisms of Choice)
The U.S. - a Mixed Economy

Back 17

an economy that uses both market and non market signals to allocate goods and resources.

Front 18

Define "Externalities"

Back 18

Costs (or benefits) of a market activity borne by a third arty, the difference between the social and private costs (or benefits) of a market activity.

(a cost imposed on innocent third parties)

Front 19

Negative Externalities

Back 19

A free market tends to over-produce the good which produces a negative externalty.

Too much pollution.
Too much poverty.

Front 20

Market Failure

Back 20

An imperfection in the market mechanism that prevents optimal outcomes.

-the market does not produce the best possible mix of output.

Front 21

Government Failure

Back 21

Government intervention that fails to improve economic outcomes.

The inefficincies associated with government intervention prevent the economy from fully utilizing it's productive capacity.

Front 22

Define "Laissez-faire" (les-say fair)

Back 22

the doctrine of "Leave it alone" of nonintervention by government in the Market Mechanism.

Leaving the market alone to make basic economic decisions.