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Test Bank for Macroeconomics Chapters 1-5 (11th Edition by N. Gregory Mankiw)
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Test Bank for MacroeconomicsChapters 1-5 (11th Edition by N. Gregory
Mankiw)
What are the three core choices in the economy? - ANSwhat, how, and for whom
Define "economy". - ANSthe grand sum of all production and consumption activities
Define "scarcity". - ANSthe limitation of a nation's resources
What are the four basic factors of production? - ANSland, labor, capital, and entrepreneurship
Define "economics". - ANSthe study of how people use scarce resources
Define "opportunity cost". - ANSwhat is given up to get something else
What does the law of increasing opportunity cost state? - ANSWe must give up ever-increasing
quantities of other goods and services in order to get more of a particular good.
Define "efficiency". - ANSsqueezing maximum output out of available resources
Are output combinations outside of the production possibilities curve attainable or unattainable?
- ANSunattainable
What type of economy do conservatives support? - ANSlaissez faire (resist work place
regulation, price controls, and minimum wage)
What type of economy do liberals support? - ANSgovernment intervention (argue that
resistance of work place regulation, price controls, and minimum wage temper the excesses of
the market)
Define "macroeconomics". - ANSallocating the resources of an entire economy to achieve
aggregate economic goals
Define "microeconomics". - ANSbehavior and goals of individual market participants
Give the basic definition of economics. - ANSthe scarcity of resources
What is the equation for opportunity cost? - ANSwhat you give up divided by what you get
, Who is the grandfather of economics and supports laissez faire economy? - ANSAdam Smith
Who is the father of modern Communism? - ANSKarl Marx
Who supports the mixed economy? - ANSJohn Maynard Keynes
Define "gross domestic product (GDP)". - ANSthe total market value of all the goods and
services a nation produces in a year
Define "per capita GDP". - ANShow much output the average person would get if all output were
divided evenly among the population
Define "human capital". - ANSthe skills and knowledge of workers
Define "capital intensive". - ANSproduction processes that use a high ratio of capital to labor
inputs (i.e. machines and technology)
Define "productivity". - ANSoutput per unit of input
Define "factor mobility". - ANSreallocating resources from one industry to another (i.e.
agriculture -> technology)
Define "comparative advantage". - ANSwhat advantage you have with your factors of
production; huge aspect of trade
Define "production possibilities". - ANSalternative combinations of final goods and services that
could be produced in a given period with all available resources and technology
Define "outsourcing". - ANSdoing something in another country; increases output
Define "externalities". - ANScosts or benefits of a market activity borne by a third party; affects
the collective well-being of a community
List the [four] sources of government intervention. - ANS1. Legal Framework (i.e. property
rights, laws)
2. Environment (i.e. externalities, pos & neg)
3. Protection of Consumers (antitrust, monopoly)
4. Protection of Labor (min wage, child labor laws)
Define "monopoly". - ANSa firm that produces the entire market supply of a particular good or
service
Define "monopoly exploitation". - ANSpaying too much for too little (antitrust laws)
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