Economic_review_test_1

Economic_review_test_1 - Economics Test one review Chapter...

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Economics: Test one review Chapter 1 1. Scarcity: Resources used to produce goods are limited 2. Economics: Study of choices when there is scarcity 3. Factors of Production: resources used to produce goods and services, also known as production inputs or resources 1. Natural resources: resources provided by nature and use to produce goods and services 2. Labor: Human effort, including both physical and mental effort, used to produce goods and services 3. Physical Capital: Stock of equipment, machines, structures, and infrastructure that is used to produce goods and services 4. Human Capital: Knowledge and skills acquired by a worker through education and experience an used to produce goods and services 5. Entrepreneurship: effort used to coordinate the factors of product to produce and sell products 4. Positive analysis: answers the questions, What is or will be? 5. Normative analysis: answers the question, what ought to be? 6. Economic model: Simplified representation of an economic environment, often employing a graph 7. Variable: measure of something that can take on different values 8. Four elements of economics: 1. Use assumptions 2. Ceteris paribus: all other variables are held fixed 3. Marginal change: how will a small, one unit change in one variable affect another variable 4. People act rationally 9. Macroeconomics: Study of a nation's economy as a whole, focusing on the issues of inflation, unemployment, and economic growth 10. Microeconomics: Study of choices made by households, firms, and government and how these choices affect the markets for goods and services 11. Positive relationship: Relationship in which two variables move in the same direction, also called a direct relationship 12. Negative relationship: Relationship in which two variables move in opposite directions, also called an inverse relationship 13. Slope of a curve: Vertical difference between two points, called rise, divided by the horizontal difference, called run Chapter 2 1. Opportunity cost: the cost of trade in terms of another variable 2. Production possibilities curve: A curve that shows the possible combinations of products that an economy can produce, given that its productive resources are fully employed and efficiently used 3. Marginal benefit: Additional benefit resulting from a one unit, small increase in some activity 4. Marginal cost: Additional cost resulting from a une unit, small increase in some activity
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5. Voluntary exchange: an exchange that makes both people better off 6. Diminishing returns point: Point on a graph which before this point output will increase at an increasing rate and beyond this point output will increase at a diminishing rate 7. Nominal value: face value of an amount of money 8. Real value: Value of an amount of money in terms of what it can buy 9. Real Nominal Principle: People care about the real value of goods not the nominal value Chapter 3 1. Perfectly Competitive Market: A market with many sellers and buyers of a homogeneous product and no barriers to entry.
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