Microeconomics Questions – Flashcards
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Economics studies choices that arise from one fact. What is that fact?
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The fact is scarcity—human wants exceed the resources available.
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Provide three examples of wants in the United States today that are especially pressing but not satisfied.
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Security from international terrorism, cleaner air in our cities, better public schools.
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In the following three news items, find examples of the what, how, and for whom questions: "With more research, we will cure cancer"; "A good education is the right of every child"; "Congress raises taxes to curb the deficit.
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More research is a how question, and a cure for cancer is a what question. Good education is a what question, and every child is a for whom question. Raising taxes is a for whom question
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How does a new Starbucks in Beijing, China, influence self-interest and the social interest?
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Decisions made by Starbucks are in Starbucks' self-interest but they serve the self-interest of its customers and so contribute to the social interest.
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How does Facebook influence self-interest and the social interest?
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Facebook serves the self-interest of its investors, users, and advertisers. It also serves the social interest by enabling people to share information
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Globalization
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The expansion of international trade and the production of components and services by firms in other countries—has been going on for centuries.
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Self Interest
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The choices that are best for the individual who makes them.
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Social Interest
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The choices that are best for society as a whole.
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Goods and Services
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The objects (goods) and the actions (services) that people value and produce to satisfy human wants.
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Macroeconomics
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Study of the national economy and global economy globaeconomy
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Microeconomics
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study of individual choices and interactions
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Scarcity
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The condition that arises because wants exceed the ability of resources to satisfy them.
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Opportunity Cost
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The opportunity cost of something is the best thing you must give up to get it.
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Margin
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A choice on the margin is a choice that is made by comparing all the relevant alternatives systematically and incrementally.
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Margin Cost
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The opportunity cost that arises from a one-unit increase in an activity. The marginal cost of something is what you must give up to get one additional unit of it.
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Margin Benefit
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The benefit that arises from a one-unit increase in an activity. The marginal benefit of something is measured by what you are willing to give up to get one additional unit of it.
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When is a choice rational?
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As long as the marginal benefit from something exceeds or equals its marginal cost
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Incentive
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A reward or a penalty—a "carrot" or a "stick"—that encourages or discourages an action. A central idea of economics is that by observing changes in incentives, we can predict how choices change.
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Normative Statement
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Disagreements that can't be settled by facts
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Positive Statements
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Disagreements that can be settled by facts
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What is factors of production and what are they?
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The productive resources that are used to produce goods and services—land, labor, capital, and entrepreneurship.
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Name the four broad categories of goods and services that we use in economics
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The four categories are consumption goods and services, capital goods, government goods and services, and export goods and services
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Distinguish between the functional distribution of income and the personal distribution of income.
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The functional distribution of income shows the percentage of total income received by each factor of production. The personal distribution of income shows how total income is shared among households
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In the United States, which factor of production earned the largest share of income in 2010 and what percentage did it earn?
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Labor is the factor of production that earns the largest share of income in the United States. In 2010, labor earned 69 percent of total income.
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Describe what, how, and for whom goods and services are produced in developing economies.
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In developing countries, agriculture is the largest percentage, manufacturing is an increasing percentage, and services are a small percentage of total production. Most production does not use modern capital-intensive technologies, but some industries do. People who work in factories have rising incomes while those who work in rural industries are left behind
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What is the circular flow model?
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A model of the economy that shows the circular flow of expenditures and incomes that result from decision makers' choices and the way those choices interact to determine what, how, and for whom goods and services are produced.
