Intro to Macro Review of Micro
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Economics may best be defined as the:
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Social science concerned with how individuals, institutions, and society make optimal choices under considerations of scarcity
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Opportunity costs exist because:
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the decision to engage in one activity means forgoing some other activity
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Economic theories
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are generalizations based on a careful observation of facts.
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Macroeconomics approaches the study of economics from the viewpoint of
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the economy.
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Which of the following statements is true?
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Microeconomics focuses on specific decision-making units of the economy; macroeconomics examines the economy as a whole
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A normative state is one that
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is based on value judgments
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The four factors of production are
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land, labor, capital, and entrepreneurial ability
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The production possibilities curve shows
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the various combinations of two goods that can be produced when society employs all of its scarce resources
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True or False Marginal analysis means that the decision makers compare the extra benefit with the extra costs of a specific choice.
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TRUE
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The law of demand states that, other things equal:
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price and quantity demanded are inversely related.
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A normal good is one:
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for which the consumption varies directly with income.
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The supply curve shows the relationship between
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price and quantity supplied
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A product market is in equilibrium:
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where the demand and supply curves intersect
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A price floor means that:
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government is imposing a minimum legal price that is typically above the equilibrium price.
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In a market system scarce goods are allocated through the operation of
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what must be sacrificed in using a resource for its next best use.
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Suppose a city block was going to be used for a parking lot. The opportunity cost would be.
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greater in New York City because the alternative uses of the block are more valuable.
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A student will decide to attend class when
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the marginal benefit of attending exceeds the marginal cost of attending.
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What is a positive economic statement
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they describe the what (example) The unemployment is 4.8 percent
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What is a Normative economic statement
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the describe what should be (example) the government ought to lower taxes
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Economics resources are the
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natural, human, and manufactured inputs used to produce goods and services
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Economists classify resources as
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land, labor, real capital, and entrepreneurs
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Because economic resources are used to produce goods and services they are called
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factors of production or inputs
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The marginal benefit curve is
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downward sloping
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The marginal cost curve is
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upward sloping
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What are the determinants of supply
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Technology, Resource prices, Number of producers
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According to economists, economic self-interest
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is a reality that underlies economic behavior
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Economists contend that most economic decisions are
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purposeful
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The assertion that "there is no free lunch" means that
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all production involves the use of scarce resources and thus the sacrifice of alternative goods
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True or False An economic model is an ideal or utopian type of economy that society should strive to obtain through economic policy.
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False
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A positive statement is one that is
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objective and is based on facts
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Which of the following statements pertains to macroeconomics
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National income grew by 2.7 percent last year
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You should decide to go to a movie
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if the marginal benefit of the movie exceeds its marginal cost
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Money is not an economic resource because
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money, as such, does not produce anything
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Economic resources are also called
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factors of production
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Which of the following will not produce an outward shift of the production curve?
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The reduction of unemployment
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Unemployment
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is illustrated by a point inside the production possibilities curve
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The law of increasing opportunity cost states that:
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if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so
