Economics Chapter One Quiz – Flashcards
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The study of how individuals, firms, and society make decisions to allocate limited resources to many competing wants.
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Economics
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_________ is about making choices.
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Economics
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_________ is one of the most popular college majors in the country.
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Economics
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________ is not the same thing as something being scarce.
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Scarcity
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Our unlimited wants clash with limited resources, leading to _______. Everyone (rich and poor) faces ________ because, at a minimum, our time on earth is limited. Economics focuses on the allocation of scarce resources to satisfy unlimited wants.
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Scarcity
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Scarcity refers to the fact that one must make choices given the _______ ________ she of he faces.
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resource limitations
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The factors that motivate individuals and firms to make decisions in their best interest.
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Incentives
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__________ are the factors, both good and bad, that influence how people make decisions.
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Incentives
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Tough admissions requirements for graduate school provide an ___________ for students to study harder in college, while lucrative commissions push car salespeople to sell even the ugliest or most unreliable car. Economics is all about how people respond to the _______ specific situations provide.
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Incentives
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The decision making by individuals, businesses, industries, and governments.
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microeconomics
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Which of the two branches of economics looks at how markets are structured?
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microeconomics
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This branch of economics also extends to such topics as labor laws, environmental policy, and health care policy.
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microeconomics
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This branch of economics focuses on the broader issues we face as a nation.
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macroeconomics
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The broader issues in the economy such as inflation, unemployment, and national output of goods and services.
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macroeconomics
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A general increase in prices economy-wide--it affects us all.
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Inflation
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Everyone will experience the sensation of being out of work at least at some point in their life. This is called:
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Unemployment
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The "i" in microeconomics refers to __________.
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individual
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The "a" in macroeconomics refers to __________.
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aggregate
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Economics is a ________ ________ that uses many facts and figures to develop and express ideas.
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social science
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This term means that economists boil down facts to their basic relevant elements and use assumptions to develop a simple model to analyze the issue.
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stylized
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To aid in our model building, economists use the ________ ________ assumption: "Holding all other things equal." That means we will hold some important variables constant.
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ceteris paribus
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Assumption used in economics (and other disciplines as well), where other relevant factors or variables are held constant.
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ceteris paribus
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Model Building is a _________--models are created and then tested. If models fail to explain reality, new models are constructed.
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process
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How well resources are used and allocated. Do people get the goods and services they want at the lowest possible resource cost? This is the chief focus of efficiency.
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efficiency
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The fairness of various issues and policies.
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equity
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A question that can be answered using available information or facts.
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positive question
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A question that is based on societal beliefs on what should or should not take place.
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normative question
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Principle 1: Economics Is Concerned with Making Choices with Limited Resources. Principle 2: When Making Decisions, One Must Take Into Account Tradeoffs and Opportunity Costs Principle 3: Specialization Leads to Gains for All Involved Principle 4: People Respond to Incentives, Both Good and Bad
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Key Principles of Economics
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Economics is not just about money. Economics is about making decisions on allocating limited resources to maximize an individual or society's well-being. Money is just one source of well-being, assuming that more money makes a person happier, all else equal.
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Money isn't economics
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For example, we all face time limitations: There are only 24 hours in a day, and some of that must be spent sleeping. The fact that we have many wants but limited resources (scarcity) means that we must make __________ in nearly everything we do.
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tradeoffs
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The value of the next best alternative; what you give up to do something or purchase something.
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opportunity cost
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Since there are always alternatives, one cannot avoid ______ ________.
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opportunity costs
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For example, if a country chooses to spend more on environmental conservation, it must use resources that could be used to promote other objectives, such as education and health care. What is this an example of?
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opportunity costs
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Suppose you and your roommate can each cook your own dinner and clean your own rooms. Alternatively, you might have your roommate clean both rooms (he's better at it than you) in exchange for you preparing dinner for two (you're a better cook). Using this arrangement, both tasks are completed in less time since each of you are specializing in the activity you're better at, plus both of you will benefit from a cleaner apartment and tastier dinner. WHAT IS THIS AN EXAMPLE OF?
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Specialization
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For example, we choose to eat every day because we face the ______ to survive, and we study and work hard because we face an ___________ to be successful in our careers.
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Incentive
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Tax Policy rests on the idea that people follow ____________.
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Incentives
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The natural tendency for society to respond to incentives leads individuals and firms to work hard and generate ideas that increase productivity, a measure of society's capacity to produce that determines our standard of ________.
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living
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Private markets and the incentives they provide are the best mechanisms known today for providing _______ ____ ___________. (3 words; one is a conjunction.)
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products and services
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The vast majority of products we consume are ________ _________.
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privately provided
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This phenomenon that markets promote efficiency through the incentives faced by individuals and firms is referred to as the _______ __________, a term coined by Adam Smith, long considered the father of economics.
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invisible hand
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When markets do fail, they tend to do so in __________ ways.
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predictable
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One example of a market failure is __________: Companies thrashing the environment unless they are regulated.
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Pollution
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Three Types of _________ ________: 1. Monopolies 2. Pollution 3. Lack of Readily Available Information
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Market Failures
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The market forces of supply and demand generally keep the economy in ____________.
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equilibrium
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Two important factors influencing the wealth of nations are ______ __________ and _______ _________.
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good institutions, human creativity
