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Microeconomics

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The study of the choices that individuals and businesses make and the way these choices interact and are influenced by governments.

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Macroeconomics

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The study of the aggregate (or total) effects on the national economy & the global economy of the choices that individual, businesses, and governments make

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Globalization

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The expansion of international trade and the production of components ad services by firms in other countries.

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Opportunity Cost

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The opportunity cost of something is the best thing you must give up to get it.

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Rational Choice

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A choice that uses the available resources to best achieve the objective of the person making the choice.

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Marginal Cost

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The opportunity cost that arises from a one-unit increase in an activity. The marginal cost of something is what you must give up to get one additional unit of it.

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Marginal Benefit

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The benefit that arises from a one-unit increase in an activity. The marginal benefit of something is measured by what you are willing to give up to get one additional unit of it.

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Economic Model

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A description of the economy or a part of the economy that includes only those features assumed necessary to explain the observed facts.

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Consumption goods and services

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Goods and services that individuals and governments buy and use in the current period.

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Capital Goods

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Goods bought by businesses and governments to increase productive resources and to use over future periods to produce other goods and services.

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Factors of Production

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- Land - Labor - Capital - Entrepreneurship

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Rent

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Income paid for the use of land

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Wages

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Income paid for the services of labor.

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Interest

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Income paid for the use of capital.

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Profit (or loss)

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income earned by an entrepreneur for running a business.

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Firms

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The institutions that organize the production of goods and services.

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Which of the following statements best describes the study of economics? Economics studies how...

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We make choices in the face of scarcity

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Which of the following is a macroeconomic issue?

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The number of jobs and production in Zimbabwe increase.

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The question of "How are goods and services produced?" most closely addresses which of the following issues?

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Should Ford use expensive industrial robots or inexpensive Mexican autoworkers to produce SUVs?

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An opportunity cost is

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The benefits of the highest-valued alternative forgone.

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Mothers Against Drunk Drivers (MADD) campaigned to increase the legal penalties of drunk driving. This successful campaign ________ of drunk driving.

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increased the marginal cost

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When economists use the term "correlation," they are referring to

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how two variables move together in a predictable way.

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A statement that argues that "If taxes on gasoline increase, gasoline consumption will decrease" is an example of what kind of statement?

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A positive statement

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Which of the following is an example of a normative statement?

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Car prices are affordable

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When people make rational choices, they

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Weigh the costs and benefits of their options and act to satisfy their wants.

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The largest share of total production in the United States is

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consumption goods and services

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The difference between consumption and capital goods is that

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Capital goods are used to produce additional goods while consumption goods are not

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Which of the following is NOT considered one of the factors of production?

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Technology

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The productive resource that organizes labor, land, and capital is?

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entrepreneurship

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______ paid for the use of land; ______ paid for the services of labor; and ______ paid for the use of capital.

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Rent is; wages are; interest is

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When Ethan continues his education beyond high school, he is increasing his

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human capital

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Most of the world's population lives in

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developing economies

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Which of the following is an example of an effort to decrease physical capital differences between an advanced and a developing economy?

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American troops build roads in Afghanistan.

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In the circular flow model, which of the following is on the buying side of the goods market?

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ii. households iii. federal, state, and local governments (ii and iii)

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Terri is enrolled in her first economics course. She is required to give a presentation about the circular flow. Which of the following statements should she include in her presentation?

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Households choose the amount of the factors of production to provide the firms.

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Which of the following transactions take place in the factor markets?

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ii. Peter gets a job at a Wal-Mart store. iii. Apple Computer opens a new store in Georgia. ii and iii

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Which of the following represents a money flow?

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interest

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California produced approximately ________ worth of goods and services in 2013.

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$2,200 billion

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While moving along a production possibilities frontier, the amount of labor______, the amount of capital ________, and the level of technology ________.

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is fixed; is fixed; is fixed

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If Wendy can produce more of all goods than Tommy in an hour, then

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Wendy has an absolute advantage in all goods.

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The sustained expansion of production possibilities is called

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Economic Growth

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What is the opportunity cost of economic growth?

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Current period consumption goods

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If a nation devotes a larger share of its current production to consumption goods, then

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its economic growth will slow down

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A market is defined as

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Any arrangement that brings buyers and sellers together

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Assume that the market for consumer gasoline is perfectly competitive. When one additional seller (gas station) enters the market,

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the price of gasoline is left unaffected

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Gasoline prices increase by 50 percent and other things remain the same. As a result, there is

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A decrease in the quantity of gasoline demanded.

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A change in the demand for apples could result from any of the following EXCEPT.

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A change in the price of an apple

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The quantity supplied of a good or service is the

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Quantity produced at one price

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A supply curve

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slopes upward; is a graph of the relationship between quantity supplied of a good and its price

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Oil refiners can refine a barrel of petroleum so that it yields either more home heating oil or more diesel fuel. If the price of diesel fuel falls, there is

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an increase in the supply of home heating oil

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Suppose over the next several years the productivity of firms producing electric cars improves dramatically. The advance in productivity leads to

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an increase in the supply electric cars so that the supply curve shifts rightward.

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If the costs of producing pizza increase, which will occur?

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The supply of pizza will decrease

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Market Equilibrium occurs when

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the quantity demanded equals the quantity supplied.

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When there is a shortage of parking spaces at your college, the

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quantity of parking spaces demanded is greater than the quantity of parking spaces supplied.

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If the market begins in equilibrium and then the demand curve shifts leftward, an

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excess supply or surplus is created, which is eliminated by a fall in price.

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