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For economists, the word "utility" means:

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pleasure or satisfaction.

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According to economists, economic self-interest:

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is a reality that underlies economic behavior.

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The study of economics is primarily concerned with:

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choices that are made in seeking the best use of resources.

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Economics involves marginal analysis because:

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most decisions involve changes from the present situation.

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Opportunity costs exist because:

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the decision to engage in one activity means forgoing some other activity.

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The assertion that "there is no free lunch" means that:

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all production involves the use of scarce resources and thus the sacrifice of alternative goods.

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Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of:

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purposeful behavior.

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Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:

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rational self-interest because he is attempting to increase his own income by identifying and satisfying someone else's wants.

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The scientific method is:

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used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses.

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In constructing models, economists:

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make simplifying assumptions.

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The Latin term "ceteris paribus" means:

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other things equal.

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Suppose an economist says that "other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

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all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant.

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Microeconomics is concerned with:

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a detailed examination of specific economic units that make up the economic system.

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Ben says that "an increase in the tax on beer will raise its price." Holly argues that "taxes should be increased on beer because college students drink too much." We can conclude that:

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Holly's statement is normative, but Ben's is positive.

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The alternative combinations of two goods that a consumer can purchase with a specific money income is shown by:

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a budget line.

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In moving along a given budget line:

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the prices of both products and money income are assumed to be constant.

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The process of producing and accumulating capital goods is called:

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investment.

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When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because:

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resources are limited.

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The production possibilities curve tells us:

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the combinations of two goods that can be produced with society's available resources.

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A nation's production possibilities curve might shift to the left (inward) as a result of:

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the depletion of its soil fertility due to overplanting and overgrazing.

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Suppose that Scoobania, which has full employment, can obtain 1 unit of capital goods by sacrificing 2 units of consumer goods domestically but can obtain 1 unit of capital goods from another country by trading 1 unit of consumer goods for it. This reality illustrates:

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achieving points beyond the production possibilities curve through international specialization and trade.

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If we say that two variables are directly related, this means that:

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an increase in one variable is associated with an increase in the other variable.

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The slope of a straight line can be determined by:

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comparing the absolute vertical change to the absolute horizontal change between two points on the line.

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Private property:

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encourages owners to maintain or improve their property so as to preserve or enhance value.

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The regulatory mechanism of the market system is:

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competition

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Broadly defined, competition involves:

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independently acting buyers and sellers and freedom to enter or leave markets.

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Specialization—the division of labor—enhances productivity and efficiency by:

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allowing workers to take advantage of existing differences in their abilities and skills. avoiding the time loss involved in shifting from one production task to another. allowing workers to develop skills by working on one, or a limited number, of tasks.

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The use of money contributes to economic efficiency because:

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it promotes specialization by overcoming the problems with barter.

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If competitive industry Z is making substantial economic profit, output will:

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expand in industry Z as more resources will move to that industry.

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From society's point of view, the economic function of profits and losses is to:

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reallocate resources from less desired to more desired uses.

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Economic profits in an industry suggest the industry:

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should be larger to better satisfy consumers' desire for the product.

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If competitive industry Y is incurring substantial losses, output will:

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contract as resources move away from industry Y.

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The competitive market system:

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encourages innovation because successful innovators are rewarded with economic profits.

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In a competitive market economy, firms select the least-cost production technique because:

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to do so will maximize the firms' profits.

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The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:

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creative destruction.

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The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of:

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consumer sovereignty.

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The invisible hand refers to the:

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notion that, under competition, decisions motivated by self-interest promote the social interest.

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The invisible hand concept suggests that:

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assuming competition, private and public interests will coincide.

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The incentive problem under communist central planning refers to the idea that:

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workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.

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The simple circular flow model shows that:

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households are on the selling side of the resource market and on the buying side of the product market.

Microeconomics chapter 1,2 James Zipperer – Flashcards

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