47 Questions
What does scarcity require individuals to do?
Allocate their time and money
What does opportunity cost refer to?
The value placed on a choice
According to economics, what does 'rational self-interest' mean?
Pursuing opportunities to maximize satisfaction
What does 'marginal' mean in economics?
A change in
Why is marginal analysis important in decision making?
To compare marginal benefits and costs
What is a well-tested and widely accepted economic theory referred to as?
An economic law
What are economic principles expressed as?
Tendencies of average consumers, workers, or business firms
What assumption do economists use when constructing theories?
Ceteris paribus assumption
What are the general categories into which economists classify economic resources?
Land, labor, capital, and entrepreneurial ability
Which resource consists of the physical and mental talents of individuals used in producing goods and services?
Labor
What does the resource capital include for economists?
Manufactured aids used in producing consumer goods and services
What does a production possibilities table list?
Different combinations of two products that can be produced with a specific set of resources
What is the special human resource, distinct from labor, called according to economists?
Entrepreneurial ability
How are the economy's output of capital goods and consumer goods represented on a production possibilities curve?
Consumer goods on the horizontal axis and capital goods on the vertical axis
What does a point lying inside the production possibilities curve imply?
It reflects less total output and is less desirable than points on the curve
What does the law of increasing opportunity costs indicate?
The opportunity cost of each additional unit of pizzas is greater than the opportunity cost of the preceding one
According to the optimization rule, when should an economic activity be expanded?
When marginal benefit exceeds marginal cost
What does the optimal quantity of pizza production indicate?
The point where marginal benefit equals marginal cost
How do unemployment and unused production capacity relate to the production possibilities model?
Less output is produced than at full employment
What does a shift from the inner curve to curve A’ B’ C’ D’ E’ in Figure 1.5 indicate?
Economic growth
What contributes to economic growth according to the text?
Increases in supplies of resources, improvements in resource quality, and technological advances
What does a point outside the production possibilities curve indicate?
Unattainable level of production
Upon what specific assumptions is the production possibilities curve based?
Full employment and fixed resources
What is the main concern of economics?
Satisfying unlimited wants with limited resources
What is the definition of economics according to the text?
The social science concerned with how to make optimal choices under conditions of scarcity
What is the main characteristic of the market system according to the text?
Private ownership and freedom of choice
What does microeconomics focus on?
Individual units such as a person, a household, a firm, or an industry
How do economists view the world according to the text?
Through the lens of scarcity
What does the economic perspective emphasize according to the text?
Scarcity and choice
Which of the following is an example of positive economics?
'The unemployment rate in France is higher than that in the United States.'
What does a budget line visualize?
Various combinations of two products a consumer can purchase with a specific money income
What causes people to be forced to make choices according to the text?
Limited productive capacity of scarce resources
What does society's economizing problem stem from?
Limited or scarce economic resources
What is the fundamental problem faced by society according to the text?
The mismatch between wants and resources
What is the focus of macroeconomics?
The economy as a whole or its basic subdivisions or aggregates
What does economics focus on?
How individuals, institutions, and society make optimal choices under conditions of scarcity
Which statement best describes normative economics?
Incorporates value judgments or what particular policy actions should be recommended
What does positive economics focus on?
Facts and cause-and-effect relationships
What is the economizing problem faced by individuals?
'We desire various goods and services that provide utility.'
Economics is the social science concerned with how individuals, institutions, and society make ______ choices under conditions of ______.
optimal - scarcity
Economists view the world through the lens of ______.
scarcity
What does scarce economic resources mean?
Limited goods and services
What is the definition of opportunity cost?
The value of the next best alternative forgone
How would you describe the decision-making process in economics, where individuals weigh costs and benefits to make decisions?
Purposeful and rational
What condition ensures profitability when selling a ticket to a standby passenger?
If the passenger pays more than the marginal cost
What is the correct sequence of steps in the economics scientific method (procedure) described?
Observing real-world behavior, forming a hypothesis, accepting or rejecting the hypothesis, ongoing testing, evolving into a theory.
What term is used to describe a thoroughly tested and widely accepted economic theory, often referred to as a fundamental concept in economics?
Economic law
Explore the traditional division of the field of economics into microeconomics and macroeconomics. Understand how the relationship between the price of Pepsi and purchases of Pepsi is analyzed in isolation within the context of economics.
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