Econ Chapters 1 and 2 Flashcards

Questions and Answers

Which of the following lies primarily within the realm of macroeconomics?

A study of how tax cuts stimulate aggregate production (correct)

An analysis of supply and demand conditions in the electricity market

A study of the impact of 'mad cow' disease on the price of beef worldwide

A study of the demand for gasoline

Marginal thinking is best demonstrated by:

Deciding to never purchase a coat made with animal skins or furs

Acquiring the information relevant to a choice before making that choice

Measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake

Choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. (correct)

Scarcity exists because of:

Unlimited wants and limited resources (correct)

Specialization and division of labor

The allocation of goods by prices

The market mechanism

Which of the following best characterizes the circular flow of income?

Businesses buy resources from households, and households use their income from the sale of resources to buy goods and services from businesses. Signup and view all the answers

The opportunity cost of an action:

Is a subjective valuation that can be determined only by the individual who chooses the action. Signup and view all the answers

Regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected __________ doesn't change.

economy Signup and view all the answers

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.

the production possibilities frontier Signup and view all the answers

In a discussion of economics, which of the following would exert the most influence on an individual firm's decision to hire workers?

The macroeconomy Signup and view all the answers

In countries like _____________, the command economy predominates.

Cuba and North Korea Signup and view all the answers

In the circular flow diagram model:

Both (a) and (b) are correct. Signup and view all the answers

Specialization:

Can lead to an increase in overall production. Signup and view all the answers

Economic models like the _____________________ are not physical models, but instead are diagrams or graphs or even mathematical equations that represent economic patterns or theories.

circular flow diagram Signup and view all the answers

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

The benefit to his grades from studying for an hour. Signup and view all the answers

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

Normative statements Signup and view all the answers

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

Marginal analysis Signup and view all the answers

In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.

Utility Signup and view all the answers

Macroeconomics:

Is concerned with the expansion and contraction of the overall economy. Signup and view all the answers

Macroeconomic topics do not usually include:

The profit maximizing decisions of an individual manufacturer. Signup and view all the answers

Which of the following best denotes the reason for the existence of substantial black markets?

A command economy Signup and view all the answers

The two main tools of macroeconomic policy include monetary policy, and fiscal policy, which involves __________ spending.

government Signup and view all the answers

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set.

budget constraint Signup and view all the answers

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

Positive statements Signup and view all the answers

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of:

Buyers and sellers. Signup and view all the answers

Study Notes

Macroeconomics vs. Microeconomics

Macroeconomics studies large-scale economic factors, such as how tax cuts influence aggregate production.
Microeconomics focuses on individual markets, such as the demand for gasoline or the electricity market.

Marginal Thinking

Marginal thinking involves making decisions based on the additional benefits of an action, like studying for one more hour to improve quiz scores.

Concept of Scarcity

Scarcity arises due to unlimited wants juxtaposed against limited resources, necessitating choices and trade-offs.

Circular Flow of Income

The circular flow model illustrates how businesses acquire resources from households, which in turn spend their income on goods and services produced by these businesses.

Opportunity Cost

Opportunity cost is the subjective value of the benefit received from the next best alternative forgone by making a choice.

Economic Models

Economic models, such as the circular flow diagram, use graphical representations to illustrate economic theories and patterns.

Specialization

Specialization enhances overall production efficiency as workers focus on specific tasks, leading to skill development.

Positive vs. Normative Statements

Positive statements objectively describe the current state of the economy, while normative statements express subjective views on how the economy should function.

Macroeconomic Concerns

Macroeconomics addresses issues like economic growth, inflation, and unemployment, and is mainly concerned with the overall economy rather than individual manufacturer decisions.

Black Markets

Substantial black markets often emerge in command economies due to government regulations and laws.

Tools of Macroeconomic Policy

The two primary tools of macroeconomic policy are monetary policy and fiscal policy, with the latter involving government spending decisions.

Budget Constraint

The budget constraint model depicts the choices available to individuals under conditions of scarcity, showing income limits in decision-making.

Market Orientation

In a market-oriented economy, production decisions are influenced by the interactions of buyers and sellers, rather than government planning or controls.

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Description

Test your understanding of key concepts from Economics chapters 1 and 2. This quiz focuses on macroeconomic principles and marginal thinking, providing a great way to reinforce your learning. Perfect for students preparing for exams or anyone looking to refresh their knowledge.