Econ 2020 Test 1 Fink Auburn University

Front 1

scarcity

Back 1

the limited nature of society's resources

Front 2

economics

Back 2

the study of how society manages its scarce resources

Front 3

efficiency

Back 3

the property of society getting the most is can from its scarce resources

Front 4

equality

Back 4

the property of distributing economic prosperity uniformly among the members of society

Front 5

opportunity cost

Back 5

whatever must be given up to obtain some item

Front 6

Ten Principles of Economic

Back 6

1. People Face Trade-offs (trade offs between efficiency and quality)
2. The Cost of Something Is What You Give Up to Get It (opportunity cost)
3. Rational People Think at the Margin (comparing marginal benefits and marginal costs- decisions aren't black and white)
4. People Respond to Incentives
5. Trade Can Make Everyone Better Off
6. Marketers Are Usually a Good Way to Organize Economic Activity (economic decisions made by millions of firms and households)
7. Governments Can Sometimes Improve Market Outcomes
8. A Country's Standard of Living Depends on Its Ability to Produce Goods and Services
9. Prices Rise When the Government Prints Too Much Money
10. Society Faces a Short-Run Trade-off Between Inflation and Unemployment

Front 7

rational people

Back 7

people who systematically and purposefully do the best they can to achieve their objectives

Front 8

marginal changes

Back 8

small incremental adjustments to a plan of action

Front 9

incentives

Back 9

something that induces a person to act

Front 10

market economy

Back 10

the economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services

Front 11

property rights

Back 11

the ability of an individual to own and exercise control over scarce resources

Front 12

market failure

Back 12

a situation in which a market left on its own fails to allocate resources efficiently

Front 13

externality

Back 13

the impact of one person's actions on the wellbeing of a bystander

Front 14

market power

Back 14

the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

Front 15

productivity

Back 15

the quantity of goods and services produced from each unit of labor input

Front 16

inflation

Back 16

an increase in the overall level of prices in the economy

Front 17

business cycle

Back 17

fluctuations in economic activity, such as employment and production

Front 18

Circular-Flow Diagram

Back 18

a visual model of the economy that shows how dollars flow through markets among households and firms

Front 19

factors of productions (Circular- Flow Diagram)

Back 19

labor, land, and capital used by firms to produce goods and services

Front 20

markets for goods and services (Circular- Flow Diagram)

Back 20

households buy the output of goods and services that firms produce

Front 21

markets for factors of production (Circular- Flow Diagram)

Back 21

households provide the inputs that firms use to produce

Front 22

The Production Possibilities Frontier

Back 22

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

Front 23

Microeconomics

Back 23

the study of how households and firms make decisions and how they interact in markets

Front 24

Macroeconomics

Back 24

the study of economy wide phenomena, including inflation, unemployment, and economic growth

Front 25

positive statements

Back 25

claims that attempt to describe the world as it is

Front 26

normative statements

Back 26

claims that attempt to describe how the world should be

Front 27

market

Back 27

a group of buyers and sellers of a particular good or service

Front 28

competitive market

Back 28

a market in which there are many buyers and many sellers so that each has a negligible impact on the market price

Front 29

quantity demand

Back 29

the amount of a good that buyers are willing and able to purchase

Front 30

law of demand

Back 30

the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises

Front 31

demand schedule

Back 31

a table that shows the relationship between the price of the good and the quantity demand

Front 32

demand curve

Back 32

a graph of the relationship between the price of a good and the quantity demand

Front 33

normal good

Back 33

a good for which, other things equal, an increase in income leads to an increase in demand

Front 34

inferior good

Back 34

a good for which, other things equal, an increase in income leads to a decrease in demand

Front 35

substitutes

Back 35

two goods for which an increase in the price of ones leads to an increase in demand for the other (often things that replace each other: hotdogs and hamburgers, movie tickets and video rentals)

Front 36

complements

Back 36

two goods for which an increase in price of one leads to a decrease in the demand of the other (often things used together: automobiles and gas, peanut butter and jelly)

Front 37

quantity supplied

Back 37

the amount of a good that sellers are willing and able to sell

Front 38

law of supply

Back 38

the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises

Front 39

supply schedule

Back 39

a table that shows the relationship between the price of a good and the quantity supplied

Front 40

supply curve

Back 40

a graph of the relationship between the price of a good and the quantity supplied

Front 41

equilibrium

Back 41

a situation in which the market prices has reached the level at which quantity supplied equals quantity demanded

Front 42

equilibrium price

Back 42

the price that balances quantity supplied and quantity demanded

Front 43

equilibrium quantity

Back 43

the quantity supplied and the quantity demanded at the equilibrium price

Front 44

surplus

Back 44

a situation in which the quantity supplied is greater than the quantity demanded

Front 45

shortage

Back 45

a situation in which quantity demanded is greater the quantity supplied

Front 46

law of supply and demand

Back 46

the claim that the price of any good adjusts to bring the quantity supplied and quantity demanded for that good into balance

Front 47

Three Steps to Analyzing Changes in Equilibrium

Back 47

1. Does the even change the supply curve, the demand curve, or both?
2. Does the curve shift left or right?
3. Use supply and demand diagrams to compare initial and new equilibrium

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total revenue

Back 48

the amount a firm receives for the sale of its output

Front 49

total cost

Back 49

the market value of the inputs a firm uses in production

Front 50

profit

Back 50

total revenue minus total cost

Front 51

explicit costs

Back 51

input costs that require an outlay of money by the firm

Front 52

implicit costs

Back 52

input costs that do not require an outlay of money by the firm

Front 53

economic profit

Back 53

total revenue minus total cost cost, including both implicit and explicit costs

Front 54

accounting profit

Back 54

total revenue minus total explicit costs

Front 55

production function

Back 55

the relationship between the quantity of inputs used to make a good and the quantity of output of that good

Front 56

marginal product

Back 56

the increase in output that arises from an additional unit of input

Front 57

diminishing marginal product

Back 57

the property whereby the marginal product of an input declines as the quantity of the input increases

Front 58

fixed costs

Back 58

costs that do not vary with the quantity of output produced

Front 59

variable costs

Back 59

costs that vary with the quantity of output produced

Front 60

average total cost

Back 60

total cost divided by the quantity of output

Front 61

average fixed cost

Back 61

fixed costs divided by the quantity of output

Front 62

average variable cost

Back 62

variable cost divided by the quantity of output

Front 63

marginal cost

Back 63

the increase in total cost that arises form an extra unit of production

Front 64

efficient scale

Back 64

the quantity of output that minimizes the average cost

Front 65

economies of scale

Back 65

the property whereby the long-run average total cost falls as the quantity of output increases

Front 66

diseconomies of scale

Back 66

the property whereby the long-run average total costs increases as the quantity of output increases

Front 67

constant returns to scale

Back 67

the property whereby long-run average total cost stays the same as the quantity of output changes