Economics > unit 2 > Flashcards

unit 2 Flashcards

(90 cards)

Study These Flashcards
1
Q

Opportunity Cost

A

The potential benefits that an individual, investor, or business misses out on when choosing one alternative over another

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Opportunity costs are _ ­­ by definition, hence they can be easily _

A

Unseen, overlooked

Understanding the potential missed opportunities when a business or individual chooses one investment over another allows for better DECISION MAKING

Opportunity cost is the FOREGONE (missed, sacrifice, omitted) benefit that would have been derived from an option NOT chosen

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

To properly evaluate opportunity costs

A

the COSTS and BENEFITS of every option available must be considered and weighed against the others

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Considering the value of opportunity costs

A

can GUIDE individuals and organizations to MORE PROFITABLE decision-making

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Opportunity Cost

A

= FO – CO

What does FO mean?
Return on BEST Forgone Option

  1. What does CO mean?
    Return on Chosen Option ​

Hence the formula for calculating an opportunity cost is simply the difference between the expected returns of each option

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

A student spends three hours and $20 at the movies the night before an exam. What is the opportunity cost?

A

Time spent studying
Money to spend on something else

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Opportunity cost is the next-best

A

the next-best-thing that you would be giving up.

Every choice has an opportunity cost
Think “trade off”
OC happens because of the issue of scarcity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Scarcity

A

Unlimited wants & limited means

2 Types:
Explicit Alternatives:
Things we see
Implicit Alternatives:
Things we do NOT see

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q
  1. Why can’t we have everything we want in life. – one word?
A

Scarcity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Our inclination is to focus on

A
  1. What is another way to describe explicit alternatives?
    Short term
  2. What is another way to describe implicit alternatives?
    Long term
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Economists → categories
Resources necessary to produce goods & services

A

AKA Factors of Production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

4 Factors of Production

A

Land
Labour
Capital
Entrepreneurship

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q
  1. What is the definition of Factors of Production?
A

The inputs needed for creating a good or service, and the factors of production includeland, labor,entrepreneurship, andcapital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q
  1. Who enjoys the greatest wealth in a society?
A

Those who control the factors of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q
  1. Who controls the factors of production in a capitalist society?
A

Business owners & investors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q
  1. Who controls the factors of production in a socialist society?
A

Government

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q
  1. What are three forms that land can take? (3)
A

Agriculture
Real estate
Resources available on the land
i.e. timber, soil, oil & gas, minerals and alloys

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Land

A

Essential component of most ventures

Importance can diminish or increase based on industry
i.e. a technology company can easily begin operations with zero investment in land
If its operations are on a farm or there is a forest
But the tech company does not farm the land or harvest the timber

Most significant investment for a real estate venture

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q
  1. What does Labor refer to?
A

The effort expended by an individual to bring a product or service to the market

  1. Example of labor?
    Construction worker, waiter, receptionists, manager, artists, musician, etc…
  2. What are workers paid for? (4)
    Time, effort, level of skill & training
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q
  1. Who gets paid a low wage & why?
A

Uneducated & untrained
only bringing physical capacity

  1. Who gets paid a high wage & why?
    Skilled & trained
    Training took time & money
    Hence need to be compensated
  2. What term is used to refer to Skilled and trained workers?
    Human capital
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q
  1. What does “capital” typically refer to in economics?
A

Money

  1. Why is money not a factor of production?
    because it is not directly involved in producing a good or service
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q
  1. What does money do?
A

Facilitates the processes used in production

  1. What can entrepreneurs or company owners do with money?
    Purchase capital goods
    Purchase land
    Pay wages
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q
  1. Difference between personal and private capital?
A

Personal Capital = your stuff
Private capital = a businesses’ stuff

  1. Quick Review
    Company uses money to buy a tractor or office desks and chairs, is that capital?
    Heck Yeah
    Is money capital?
    Heck No
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q
  1. What do companies do when there is an economic contraction or when they suffer losses?
A

Cut back on capital expenditure to ensure profits

  1. What do companies do during periods of economic expansion?
    They invest in new machinery and equipment to bring new products to market
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Capital =
Resources that make you money
26
21. Why is entrepreneurship the secret sauce?
It combines all the other factors of production into a product or service for the consumer market 22. Provide an example of entrepreneurship? META – Facebook or Starbucks
27
23. How does Howard Schultz epitomize the four factors of production?
He acquired land – prime real estate in big cities Capital – large machinery to produce and dispense coffee Labor – employees at its stores Entrepreneurship – vision – demand for coffee & combining the other three factors
28
More on Entrepreneurship
Individual responsible for combining & organizing 3 factors Assuming the risks of business failure Providing the creativity and managerial skills
29
circular flow observations
2 Markets Product Resource 2 Actors Households Firms 2 Flows Circular
30
What 3 items flow in the circular model?
Products Resources Money
31
What are the 2 groups in the model?
Firms (businesses) Households
32
3. Where do firms (businesses) sell goods & services to households?
Product Market
33
4. Where do households sell resources to firms (businesses)?
Resource Market
34
5. Why is it called the circular flow?
Businesses use resources to make products that people buy
35
Resource Market
Households -Supply (Sellers) Factors of Production Firms -Demand (Buyers)
36
Product Market
Households -Demand (Buyers) -Goods & Services Firms -Supply (Sellers)
37
Households (S)
Own Factors of Production (FoP) Sell labor (RM) Firms w/ FoP - Make Goods & Services Households (D) Buy Goods & Services (PD) Repeat
38
6. Does money flow the same way?
No – other direction
39
7. In the Product Market, what is it called when households use money to buy goods and services?
Consumer spending
40
8. What do firms (businesses) call this money?
Revenue
41
9. Firms can not keep all that money, as they must pay for resources. What do firms call this?
Cost of Production
42
Firms
Provide Income (RM) Wages, rent – for FoP Households Spend $ on Goods & Services (PM) Firms Receive Revenue To pay cost of production Repeat
43
Money & resources flow b/w 2 different sectors
Firms & households Why? Households & firms hold different resources that the other needs
44
Businesses & households
need each other to exist
45
11. Is the local mall an example of Product Market or Resource Market?
Both Some people buy products (goods & services) – Product Market Some people work (jobs) – Resource Market
46
12. Do businesses demand or supply?
Both Demand labor – Resource Market Supply products – Product Market
47
Do Households demand or supply?
Both Supply labor – Resource Market Demand products – Product Market
48
13. What does the Public Sector refer to?
Part of the economy run by the government
49
14. What determines the size and role of government in the economy?
Type of economic system Command or Mixed or Market Even in Market Economy = govt still plays a role
50
What is it called when the government buys goods and services in the product market or resources in the resource market?
Government spending
51
16. Where does government get the money to provide Public Goods and Services?
Taxes – firms & households
52
17. Circular model provides a good idea how the modern economy _____________
works
53
18. Why did he claim that capitalism is like a hamster wheel?
Constantly spending, earning, spending and earning… Money moves from producers to households & back again in an endless loop
54
19. Does the matrix enslave us or liberate us?
It would be nice if we did not have to work No modern conveniences No cell phones, computers, medicine, hospitals, schools, etc…
55
Marginal decisions =
understanding the impact small decisions make on the whole
56
Utility
Usefulness
57
Marginal
Extra
58
Diminishing
Reducing
59
Marginalism
is all about making decisions at the margin It is about analyzing the extra cost Our subjective understanding of value shapes the way me make decisions Objective measures to consider in the decision-making process
60
Two key, antithetical (opposing) concepts to explore
Marginal Utility The Law Diminishing Marginal Returns
61
Marginal utility
is the added satisfaction that a consumer gets from having one more unit of a good or service. The concept of marginal utility is used by economists to determine how much of an item consumers are willing to purchase. Marginal utility can be positive, zero, or negative.
62
Marginal utility is useful in explaining how consumers make choices to get the most benefit
from their limited budgets. In general, people will continue consuming more of a good as long as the marginal utility is greater than the marginal cost. Note: Although marginal utility tends to decrease with consumption, it may or may not ever reach zero depending on the good consumed.
63
Positive Utility
Occurs when having more of an item brings additional happiness i.e. I eat a slice of cake, then I have a 2nd slice & it brings extra joy Marginal utility from consuming cake is positive
64
Zero Utility
Happens when consuming more of an item brings no extra measure of satisfaction i.e. you might feel fairly full after two slices of cake and wouldn't really feel any better after having a 3rd slice Marginal utility from eating cake is zero
65
Negative Utility
Happens when you have too much of an item, so consuming more is actually harmful i.e. the 4th slice of cake might even make you sick after eating three pieces of cake
66
Intro to Law of Diminishing Marginal Utility
As consumption increases, the marginal utility derived from each additional unit declines. The marginal utility can decline into negative utility, as it may become entirely unfavorable to consume another unit of any product.
67
Marginalism definition
The economic principle that decisions are made and behavior occurs in terms of incremental units, rather than categorically
68
Marginalism is associated with?
Microeconomics
69
Thinking on the
Margin is one of the most important parts of basic economics.
70
3. margin what does it mean?
one more
71
Marginal benefit
tends to… Decrease ↓ 6. Marginal cost tends to… Increase ↑
72
7. What point are economists interested in?
Margin cost = marginal benefit
73
8. Why is past this point bad?
Costs are greater than benefit = losing out
74
9. Why is before this point bad?
Not getting the greatest benefit = losing out
75
This is why marginalism is so important. It allows economists to
zoom in on specific Decisions and tell how they should be made.
76
You should keep going until as long as
MC = MB
77
What do we need to produce things?
Resources
78
What are all resources?
Scarce
79
What are resources sometimes called?
Factors of production
80
What do economists like to use to explain the idea of scarcity?
Production Possibilities Curve (PPC)
81
5. What does the graph show? (2)
How an economy can use its resources to produce 2 different goods Different combinations All scream energy All sushi Combination of the 2
82
6. Can goods be produced outside the curve?
No → impossible Why? Not enough resources
83
7. What is the difference between Consumer goods and Capital goods?
Consumer goods Made for consumers Direct consumption For example? Cars Capital goods Indirect consumption For example & purpose? Tools & machines Used to produce consumer goods
84
8. What happens to the PPC if a resource becomes less productive?
Curve shifts inwards What is the impact? Produce less goods
85
9. What would happen to the curve if a new technology was introduced?
Curve shifts outwards What is the impact? Produce more goods
86
It does NOT indicate how much of each good should be produced But…
the production sacrifice needed to make more of the other good Hence – it demonstrates? Opportunity Cost
87
Line Change is
constant Curve Change is increasing
88
Where is Point E?
Inside the curve What does that mean? Inefficient Not all resources are being used
89
Points Below the Line Reasons may include:
Employees uneducated/not trained; out sick Natural resources not available due to weather event; shipping problem Capital resources might have had tech problems; broken down; building burned down Valuable resources siphoned off by corrupt government officials
90
Economics
flashcards
Decks in class (8)
# Cards
Brainscape helps you reach your goals faster, through stronger study habits.
© 2026 Bold Learning Solutions. Terms and Conditions