Econ Chapter 1 Cards

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Economists assume that people are rational in the sense that
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They use all available information as they take actions intended to achieve their goals
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Which of the following best describes Scarcity
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unlimited wants exceed the limited resources available
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scarcity is central to the study of economics because it implies that
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every choice involves an opportunity cost
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Scarcity
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Quantity demanded > Quantity Supplied -Economic problem is scarcity, all economies face it
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Rationality
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Marginal benefit > Marginal cost
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Trade off
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efficiency (getting the most out of given recourses vs. equity (fairness) -Giving up something to get something else
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Opportunity Cost
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– money and time cost of next best alternative
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Centrally planned economy
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Government decides
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Market economy
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consumers/producers decide
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Mixed economy
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– Consumers/producers and government decides
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AHDRR
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Assume, hypothesis, data, revise, retain
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Normative Analysis
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what should be (suggestion, opinion)
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Positive Analysis
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What is (fact)
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Microeconomics
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how one household makes business choices?
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Macroeconomics
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how the US makes choices
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Capital
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manufactured goods that are used to produce other goods and services
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Product efficiency means that
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a good or service is produced at the lowest possible cost
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allocated efficiency means that
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every good or service is produced up to the point where marginal benefit is equal to marginal costs
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What best describes scarcity
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unlimited wants exceed the limited resources available
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Scarcity is central to the study of economics because it implies that
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every choice involves an opportunity cost
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equity is
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the fair distribution of economic benefits
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Economists use the word marginals to mean an extra of additional benefit of cost of a decision. An optimal decision occurs when
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marginal benefit equals marginal cost
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Microeconomics is the study of
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how households and firms make choices, how they interact in markets, and how the government attempts to influences their choices
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Trade-offs force society to make choices, particularly when answering the following three fundamental questions:
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one, what good and services will produced? two, how will goods and services be produces, and three who will receive the goods and services produced.

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