Micro pt. 1 – Flashcards
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They use all available information as they take actions intended to achieve their goals
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Economists assume that people are rational in the sense that!!
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Unlimited wants exceed the limited resources available
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which of the following best describes scarcity? - Markets cannot properly allocate resources - Unlimited wants exceed the limited resources available - Wants cannot be fulfilled and thus all goods must be rationed - Prices of goods are very high
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every choice involves an opportunity cost.
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Scarcity is central to the study of economics because it implies that - economic agents are rational - every choice involves an opportunity cost - wants are unlimited - society must make decisions at the margin.
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people are rational
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When economists develop models designed to explain the choices people make, they generally assume that!!!
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scarcity
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One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls
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what goods will be produced, how will they be produced, and who will receive the goods
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The three economic questions that every society must answer are??
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human wants are greater than what available resources can produce.
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scarcity implies that every society and every individual face trade-offs because scarcity means that
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a good or service is produced at the lowest possible cost
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Productive efficiency means that
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every good or service is produced up to the point where marginal benefit is equal to marginal cost
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Allocative efficiency means that
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the fair distribution of economic benefits
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Equity is
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the highest valued alternative that must be give up to engage in an activity
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opportunity cost is
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to answer questions and analyze issues
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Economists use models - To disprove economic data - To answer questions and analyze issues. - To describe the real worlds exactly. - To prove that theories are true
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to test models
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Economic data is used - To test models - To prove that a model is true. - Only if all relevant data is available. - to take the place of an economic model
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Normative Analysis
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what type of economic analysis is concerned with the way things ought to be? - Rational Behavior - Marginal Analysis - Normative Analysis - Positive Analysis
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all of the above
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Economics is a social science because - it considers human behavior-particularly decison-making behavior. - it applies the scientific method to the study of the interactions among individuals. - it is based on studying the actions of individuals. - all of the above
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Microeconomics examines individual markets while macroeconomics examines the economy as a whole
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A primary difference between macroeconomics and microeconomics is
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the economy as a whole, such as how rapidly the economy grows
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Macroeconomics examines
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The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth
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Macroeconomics is
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how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices
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Microeconomics is the study of
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Yes, because the movie's opportunity cost is equal to the highest-valued alternative that must e given up to attend the movie.
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Suppose you win free tickets to a movie plus all you can eat at the snack bar for free. Would there be a cost to you to attend this movie?
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a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology
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A production possibilities frontier (PPF) is
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Comparative Advantage
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What is the basis for trade?
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A country can specialize in producing that for which it has a comparative advantage and then trade for other needed goods and services
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How can a country gain from specialization and trade?
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absolute advantage refers to the ability to produce more of a good or service using the same amount of resources and comparative advantage refers to the ability to produce a good or service at a lower opportunity cost
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The primary difference between absolute and comparative advantage is
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firms and households.
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what are two main categories of participants in markets?
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Households.
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which participants are of greatest importance in determining what goods and services are produced? - The government - Firms - Entrepreneurs - The financial sector - Households
