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100

Explain: Shortage vs. Scarcity 

Shortage- Amount of a good is below the amount demanded 

Scarcity- The always present fact that resources are limited 

100

What are the factors of Production 

Land, Labor, Capital, and Entrepreneurs 

100

What does "guns or butter" mean? 

Decisions governments have to make about their economy. Produce goods that support the people (butter) or goods to defend the nation (guns) 

100

Why does every decision involve an opportunity cost?

Since resources are scare, every decision made will require giving something else up 

100

What does making a decision at the margin mean? 

Process of deciding whether to use one additional unit of a resource 

200

What does a Production Possibilities Curve show? 

The amount or combination of goods that can be produced when using all available resources 

200

What does the Law of Increasing Costs mean? 

When production shifts from producing one good over another, more resources are needed to produce the second good 

200

What must an economy do to increase the standard of living 

Grow through innovation 

200

(Circular Flow) What do we supply in return for factor payments? 

Factors of Production 

200

What is the "Invisible Hand" 

Economic theory by Adam Smith, competition and self-interest is what guides the economy 

300

Why is the US economy mixed?

Allows for personal ownership of business and accumulation of wealth, but still allows government to regulate and support industries that want to support 

300

What are the 3 main economic questions

What to produce? 

How to produce? 

For whom to produce? 

300

What is the physical flow from households to firms 

goods and services 

300

Basic principles of American Free Enterprise 

Freedom to chose our own business, right to own private property, profit motive, competition, and customer sovereignty 

300

Governments 3 goals to promote economic strength 

Stable prices, full employment, and economic growth 

400

Critical reason for something being produced as a public good? 

Some crucial services aren't logically controlled by private enterprise. Like road construction, fire departments, and police 

400

Noise from a local football stadium is disturbing the local neighborhood, the noise is an example of what? 

Negative Externality  

400

What does the Law of Demand say will happen when price falls 

Demand will increase 

400

How does the substitution effect work when the price of an item drops? 

Demand for the substitute good will decrease since price fell for the original good 

400

How does advertising cause a shift in the demand curve? 

It shifts the curve right, since it increases demand 

500

Effect on company pricing due to elasticity of demand

Price will need to be set very near the market equilibrium 

500

Elasticity of Supply with haircuts or cargo ships, which is more inelastic 

Cargo Ships

500

How is Total Output set to maximize profit? 

Set production at the point in which marginal revenue equals marginal cost 

500

How do you compute total cost? 

Adding fixed and variable costs 

500

Law of supply says what will happen when the price of a product goes up 

Supply will increase 

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