Chapter 1 Macroeconomics Questions And Answers – Flashcards
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In economics, the pleasure, happiness, or satisfaction received from a product is called
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Utility
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Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of
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Opportunity Costs
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A person should consume more of something when its marginal benefit ______________ its marginal cost
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Exceeds
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Economics may best be defined as the social science concerned with how individuals, institutions, and society make optimal choices under conditions of
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Scarcity
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This suggests that individuals may make different choices because of different desired outcomes
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Purposeful Behavior
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This exists because the decision to engage in one activity means forgoing some other activity
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Marginal Cost
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This means that all production involves the use of scarce resources and thus the sacrifice of alternative goods
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The assertion that "There is no free lunch"
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Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact implies that, for most people, the _________________ of reading a second newspaper is less than the _________________
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Marginal Benefit, Marginal Cost
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Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates
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Opportunity Costs
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This is the process by which economists test hypotheses against facts to develop theories, principles
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The Scientific Method
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These are generalizations based on a careful observation of facts
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Economic Theories
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This Latin term means other things equal
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Ceteris Paribus
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Macroeconomics approaches the study of economics from the viewpoint of
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The entire economy
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Is concerned with a detailed examination of specific economic units that make up the economic system
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Microeconomics
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This is based on value judgments
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Normative Statement
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This is objective and based on facts
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Positive Statement
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This is deciding how to make the best use of limited resources to satisfy unlimited wants
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Economizing Problem
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Alternative combinations of two goods which a consumer can purchase with a given money income is shown by
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A budget line
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Any combination of goods lying outside of the budget line is
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Unattainable, given the consumer's income
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Other things equal, an increase in a consumer's money income shifts her budget line _____________ because she can now purchase more of both products
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Rightward
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The factors of production are
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Land, Labor, Capital, and Entrepreneurial Ability
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The main function of the entrepreneur is to
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Innovate
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This illustrates the basic principle that if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced
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Production Possibilities Curve
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A production possibilities curve shows the ______________ amounts of two goods that can be produced, assuming the full use of available resources
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Maximum
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Any point inside the production possibilities curve indicates that __________ output could be produced with available resources
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More
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The typical production possibilities curve is a _______________ line that is bowed out from ____________
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Down Sloping, the Origin
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The ____________ of resources is found MB = MC
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Optimal Allocation
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Through _____________________ a nation can attain some combination of goods lying outside its production possibilities curve
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Specialization and International Trade
