Macroeconomics- C719 Western Governors University Questions and Correct Answers

The value of the best alternative that is sacrificed to obtain something you want is a/an - Opportunity cost What is a graph that shows the various combinations of choices an individual can make with the resources available? - Choice curve The assumption that all resources are alike will produce a - straight line curve A curved production possibilities curve (PPC) changes the assumption that resources are - alike What explains how the production of larger amounts of one good leads to an increase in the sacrifice of the alternative good? - the law of increasing opportunity costs An outward shift of the production possibilities curve (PPC) increases the economy's capacity to respond to - human wants What is the most important assumption in economic models? - ceteris paribus assumption "all else being equal." Economists assume people are - rational This behavior consists of people trying to get the most of something they want (to maximize some goal) out of available resources - self-interested behavior The four factors of production are - land, labor, capital and entrepreneurship Plants, equipment, and machinery are examples of - capital resources Capital increases only when - physical or human capital increases What is entrepreneurship? - the activity of combining the other productive resources to produce goods and services, taking risks, and introducing new methods and new products (innovation.) What is profit? - the reward for innovation, risk taking, and organization What are the three basic economic questions? - What to produce? How to produce? For whom to produce? What are the three broad types of economies? - 1. Traditional economy 2. Command (or planned) economy 3. Market economy Traditional economy - answers the basic economic questions by tradition, or custom (Haiti banana farmers) Command (or planned) economy - answers the basic economic questions through central command and control (Soviet Union, China, North Korea and Cuba) Market economy - relies on incentives and the self-interested behavior of individuals to direct production and consumption through market exchanges (America) Mixed economy - a blend of tradition, command, and market economies (Most modern industrial countries have this) A good that is nonrival in consumption and not subject to exclusion is called a(n) - Public Goods (Sunsets & Lighthouses) What are negative effects that have an impact on everyone to some degree? - Public Bads (Pollution, Global Warming, Animal Extinction) Goods that nonpayers, or free riders, *CAN* be kept from consuming - Excludables Spillover benefits to third parties are called - Positive Externalities (Public Education) What is an example of a negative externality? - Pollution. It's a negative externality because it has spillover costs to third parties. The goal of an economy is for the goods and services to go to the people - who will value them the most Which of the following is the most successful method to allocate sweaters in Macroland? - Market prices Getting a mandated vaccination that protects you, but also protects others, would be considered - a pure public good In the absence of government intervention, there will be both - too many public bads and too few public goods. Which of the following is an example of a transfer payment? - Veterans' benefits. They are transfer payments because they are income and they are disbursed without work being done. In the United States, the redistributive function of the government is carried out mainly by - The redistribution function is financed at the federal level and implemented at the state and local levels.