Econ test study guide
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What is the basic problem in economics?
What does it mean to have scarce resources?
unlimited wants and limited desires
What are the four factors of production?
Give five examples of land?
natural gas, soil, water, trees
Give 3 examples of labor?
What are captial goods?
goods that you need to make other goods
What are some strategies for allocation of resources?
- Add taxes
- prohibit use
- leave things the way they are
- raise prices for everyone
- markets and price system
- first come first serve
Why does an entrepreneur go into business?
to make a profit
What is meant by opportunity cost?
- the cost of what you gave up in your choice
- cost of the second best thing
Why does every decision have an opportunity cost?
you always have choices, and everything has a price
What are tradeoffs?
How do you make a rational decision?
What does paced stand for?
- p- problem
- a- alternatives
- c- criteria
- e- evaluate
- d- decide
What are criteria?
things that matter to you in a decision
How do people and businesses specialize?
certain people do certain tasks
Why does specialization increase productivity?
- makes the best use of a particular worker's skill
- decreases time it takes
Why do people want to enagage in voluntary, non fradulant exchange?
comparative advantage- you can produce it at a lower opportunity cost
What are the 3 basic economic questions?
- What to produce
- how to produce it
- who gets the product
- (how many to produce)
Why must economic systems answer the 3 basic questions?
What is a public good? Why does the govt provide them?
- a commodity or service that is provided without profit to all members of a society
- no one else will
What are the economic functions of government? give examples of each
- To provide the legal and social framework- lawsuits
- establish a monetary system- federal reserve
- maintain competition- anti-trust laws
- providing public goods and services-highways, national defese
- correct for extranalites- hurricanes, recalls
- stablize the economy- reduce unemployment, control inflation
- resdistribute income- medicare, free lunch
What are the broad social goals of government?
- economic freedom
- economic efficancy
- economic equity
- economic growth
- economic stablitity
What happens when a government regulates industry?
- they tell it what it can and cant do
- can decrease productivity
Why would a government deregulate an industry?
to let people do things the way they want
What does a ppf or ppc show?
What does a production possibility shedule show?
possibilities and opportunity cost
On a ppf curve where is 100% efficancy? what happens to the left of curve? to the right?
- on the line
- wasting resources
- not sustainable
What is productivity?
how efficiently are you using your resources
How can new equipment and tech. add to the growth of an econ?
increase productivity and effiecnecy
How can your investment in a higher education help you have a higher standard of living?
- you are specialized
- make more money
What is meant by standard of living?
the degree of wealth and material comfort available to a person or community
What might happen if gov invests in the health, education, and training of citizens?
- increase productivity
- improve standard of living
What would you like to do?
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