Econ Chapter 1

Economists assume that people are rational in the sense that
They use all available information as they take actions intended to achieve their goals

Which of the following best describes Scarcity
unlimited wants exceed the limited resources available

scarcity is central to the study of economics because it implies that
every choice involves an opportunity cost

Scarcity
Quantity demanded > Quantity Supplied
-Economic problem is scarcity, all economies face it

Rationality
Marginal benefit > Marginal cost

Trade off
efficiency (getting the most out of given recourses vs. equity (fairness)
-Giving up something to get something else

Opportunity Cost
– money and time cost of next best alternative

Centrally planned economy
Government decides

Market economy
consumers/producers decide

Mixed economy
– Consumers/producers and government decides

AHDRR
Assume, hypothesis, data, revise, retain

Normative Analysis
what should be (suggestion, opinion)

Positive Analysis
What is (fact)

Microeconomics
how one household makes business choices?

Macroeconomics
how the US makes choices

Capital
manufactured goods that are used to produce other goods and services

Product efficiency means that
a good or service is produced at the lowest possible cost

allocated efficiency means that
every good or service is produced up to the point where marginal benefit is equal to marginal costs

What best describes scarcity
unlimited wants exceed the limited resources available

Scarcity is central to the study of economics because it implies that
every choice involves an opportunity cost

equity is
the fair distribution of economic benefits

Economists use the word marginals to mean an extra of additional benefit of cost of a decision. An optimal decision occurs when
marginal benefit equals marginal cost

Microeconomics is the study of
how households and firms make choices, how they interact in markets, and how the government attempts to influences their choices

Trade-offs force society to make choices, particularly when answering the following three fundamental questions:
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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