Economics, Scarcity, & Choice Study Guide

Fill-in-the-blank practice flashcards covering fundamental economic concepts, opportunity costs, PPC analysis, comparative advantage, macroeconomic indicators, and economic systems.

The basic economic problem is that unlimited wants combined with limited resources results in __________, which forces choices.

scarcity

Scarcity means there are not enough resources to satisfy everyone's wants, but it does not mean something is __________.

rare

What you give up when making a choice is called a __________.

trade-off

The value of the next-best alternative you give up when making a decision is the __________.

opportunity cost

Actual monetary costs that require a payment are classified as __________ costs.

explicit

The value of something you give up that does not involve a direct monetary payment is an __________ cost.

implicit

Costs that have already been paid and cannot be recovered are known as sunk costs, and they should not affect __________ decisions.

future

The satisfaction or benefit someone gets from consuming a good or service is defined as __________.

utility

In marginal analysis, the decision rule states that an economy or individual should do more of an action when __________.

$$MB > MC$$

In marginal analysis, the optimal quantity is reached when __________.

$$MB = MC$$

For the factor of production known as land, the corresponding resource payment is __________.

rent

In economics, capital refers to physical tools and equipment rather than money, and its corresponding payment is __________.

interest

The factor of production that involves organizing resources and taking risks to create a business is entrepreneurship, and its payment is __________.

profit

On a Production Possibilities Curve (PPC), any point located inside the curve is feasible but __________.

inefficient

Points located outside the Production Possibilities Curve are __________.

not feasible/unattainable

A straight Production Possibilities Curve indicates constant opportunity cost, whereas a bowed-out PPC illustrates __________ opportunity cost.

increasing

A PPC is bowed-out because resources are not equally __________ to producing both goods.

suited

Economic growth is represented by an outward shift of the PPC and is driven by two main sources: more resources and __________.

better technology

The ability to produce more of a good using the same resources is called __________ advantage.

absolute

The ability to produce a good at a lower opportunity cost than another producer is known as __________ advantage.

comparative

The three basic economic questions every economy must decide are: what to produce, how to produce, and __________ to produce.

for whom

An economic system in which the government makes most major economic decisions is a command economy, also called __________.

central planning

Minimal government intervention in the economy is referred to as __________.

laissez-faire

How scarce resources are distributed among different uses is defined as __________.

allocation

A period within the business cycle when output and employment are falling is a __________.

recession

To be officially classified as unemployed, a person must not currently have a job and must be __________ looking for work.

actively

The unemployment rate is calculated using the formula: __________ $\times 100$.

$$\text{Unemployed} \div \text{Labor Force}$$

Across the business cycle, aggregate output and unemployment generally move in __________ directions.

opposite

An increase in the overall price level that reduces the purchasing power of money is known as __________.

inflation

The assumption that other relevant factors remain constant when studying the effect of one change in an economic model is represented by the Latin phrase __________.

ceteris paribus

In the circular flow model, factors of production are bought and sold in the __________ market.

factor

An economy is efficient in production when producing maximum possible output, but it is efficient in __________ when producing the combination of goods and services that best matches what consumers want.

allocation