AP®︎ Microeconomics: Unit 1 Flashcards

Limited resources relative to unlimited wants and needs.

Human capital is workers' skills and knowledge; physical capital is tools, machines, and buildings used to produce.

Choices between alternatives that require giving up one thing to get another.

The idea that people desire more goods and services than available resources can provide.

A resource one person's use does not reduce another person's ability to use.

Existing ideas and information that can often be shared widely without being used up.

Inputs used to produce goods and services: land, labor, capital, and entrepreneurship.

The value of the next best alternative given up when a choice is made.

The process of deciding how scarce resources are used to produce and distribute goods and services.

A society's rules, institutions, and incentives for answering the three basic economic questions.

An economy guided by customs, inherited roles, and long-standing community practices.

An economy where households and firms make choices through voluntary exchange and prices.

An economy combining market decision-making with government regulation and public provision.

The idea that self-interested market choices can coordinate economic activity through prices.

Changes in prices communicate shortages, surpluses, and consumer preferences to producers and buyers.

The laws, property rights, organizations, and rules that shape economic decision-making.

The method an economy uses to organize production and distribute output, such as prices or government orders.

What goods and services to produce, how to produce them, and who consumes them.

An economy where government planners decide production, resource use, and distribution.

A graph showing the maximum combinations of two goods producible with fixed resources and technology.

Two goods are produced, resources are fixed, and technology is fixed.

Any point on the curve where all available resources are fully and efficiently used.

Any point inside the curve where resources are unemployed or not fully used.

Any point outside the curve that cannot be produced with current resources and technology.

Getting more of one good requires giving up some of the other good.

The amount of one good forgone to gain an additional unit of the other.

Divide the units of one good given up by the units of the other gained.

The curve's slope measures the opportunity cost of producing more of one good.

Constant gives a straight line; increasing bows outward; decreasing bows inward.

The output combination on the curve that best matches society's preferences.

Limited resources prevent producing every desired combination of goods.

Changes in resources or technology shift the curve outward for growth or inward for contraction.

The ability to produce more output or use fewer resources than another producer.

The ability to produce a good or service at a lower opportunity cost.

Concentrating production on the good with the lowest opportunity cost.

Increased consumption beyond a producer's PPC after specializing and exchanging.

A producer exports the good with lower opportunity cost and imports the other good.

The exchange rate between goods that must fall between both producers' opportunity costs.

Comparative advantage questions use either maximum output data or resource-per-unit input data.

Output uses higher production, while input uses fewer resources and different opportunity-cost formulas.

A decision method that compares expected total benefits with total costs.

Direct out-of-pocket payments versus forgone income or benefits from using resources differently.

The full satisfaction or revenue gained and the full economic cost incurred at a given choice.

The difference between total benefits and total costs.

The decision or quantity that produces the greatest net benefit.

Choose the quantity where marginal benefit equals marginal cost, or the last unit before marginal benefit falls below marginal cost.

The total money a firm receives from selling its output.

The satisfaction or benefit a consumer receives from consuming goods or services.

As consumption rises, each additional unit eventually provides less extra satisfaction than the previous one.

Comparing the additional benefit and additional cost of one more unit of an activity.

Past or unchangeable costs that should not affect the current optimal choice.

The total satisfaction gained from consuming a given quantity of a good or goods.

Limits on choices caused by scarce income, prices, and available purchasing power.

Marginal utility divided by price, showing satisfaction gained from each dollar spent.

Spend income so the last dollar on each good gives equal marginal utility per dollar.

Buy more of the good with higher utility per dollar and less of the other.

The extra satisfaction from one more unit consumed, which can eventually become negative.

Consumers maximize total utility subject to budget constraints by comparing marginal utility per dollar.

A buyer assumed to make choices that maximize total utility within a budget.

The best choice occurs where the additional benefit of one more unit equals its additional cost.