Macro Chapter 1 Answers – Flashcards
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study of human behavior; study of how individuals make choices that are subject to constraints such as scarcity; economists try to explain how individuals make choices
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What is economics?
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we have unlimited wants but limited needs
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scarcity
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how economists analyze human behavior; how they try to understand human choices
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What is the Economic Way of Thinking?
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value of the best forgone alternative
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opportunity cost
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opportunity cost
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What is always present when scarce resources are used to produce a good?
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a person will maximize his/her utility at the minimum cost; When an economist says an individual has made a rational choice, they mean that the individual has made the decision based on their on their own subjective opinion
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subjective opinion
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exceeds
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An individual will engage in an activity in the expected marginal benefit ________ the expected marginal cost
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secondary effects
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The unforeseen consequences that are not immediately felt are known as
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average
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Economists try to predict what the _________ individual would do, not what a unique individual would do
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based on facts and they can be proven
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positive statement
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based on opinions
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normative statement
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constant
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ceteris paribus
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good intentions do not always lead to good outcomes
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secondary effects
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causation
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association is NOT
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what is good for the individual is not always good for the group
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fallacy of composition
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scarcity and choice
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What are the key ingredients in any economic decision?
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Guthrie's
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It is Saturday night and you got the munchies. You have a decision to make. You can either go toChick-Fil-A, Gutherie's, or Chubby's Chicken Fingers. You value them in that order. What is the opportunity cost of your decision?
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In economics, we assume decisions are made based on subjective opinion.
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Which of the following are true?
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Marginal benefit will always be greater than or equal to marginal cost when participating in an activity.
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According to the eight guideposts, what is the correct statement below in relation to marginal benefit and marginal cost?
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His class average ought to be going up, not down; this class is getting hard as heck; you should study more.
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Which of the following are normative statements?
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Fallacy of Composition
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If you stand up at an FSU basketball game you will get a better view. The if everyone stands up at an FSU basketball game, the whole arena gets a better view.
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Association is Not Causation
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Whenever I wear this shirt, I get laid.
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Violation of Ceteris Paribus
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You go to TutoringZone and study harder leading to an A on Test 2. You say to yourself that TutoringZone was the only factor that led to your great results.
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Good intentions do not lead to good outcomes
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FSU ames class attendance mandatory because they argue that students will learn more. In reality, though, FSU learns that when disinterested students attend class, they distract that students that want to learn. This leads to decreased learning for all.
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changes in the personal benefits and costs associated with a choice will exert a predictable influence on human behavior.
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Economic analysis assumes that
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changes in incentives influence behavior in a predictable way-people will be less likely to choose an option as it becomes more expensive
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the most fundamental concept in economics is that
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If Susan had more money she could buy more. If everyone had more money they could buy more.
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Which of the following best illustrates the fallacy of composition?
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economize when seeking information
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The decision makers described by economic analysis
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the choices of individuals with regard to a wide range of activities, including those generally perceived as social or political.
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The basic postulate of economics indicates that changes in incentives influence
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Farmers produce fewer bushels of wheat in response to an increase in the price of wheat.
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Which of the following is NOT consistent with the basic postulate of economic that incentives matter?
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the choices people make as the result of scarcity
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Economics is primarily the study of
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a positive statement can be proved; a normative statement cannot
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The difference between a positive economic statement and normative statement is that
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changes in the personal benefits and costs associated with an activity will exert a predictable influence on the behavior of both those who are selfish and those who are unselfish.
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economic analysis assumes that
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focus their thinking on the essence of the problem at hand.
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economists make assumptions in order to
