Podcast
Questions and Answers
What is the focus of economics as a social science?
What is the focus of economics as a social science?
- Controlling government spending and taxation.
- Distributing wealth equally among individuals.
- Maximizing profits for businesses.
- Making optimal choices under conditions of scarcity. (correct)
The economic perspective only considers the financial implications of decisions, ignoring social and ethical factors.
The economic perspective only considers the financial implications of decisions, ignoring social and ethical factors.
False (B)
What does marginal analysis primarily involve in economics?
What does marginal analysis primarily involve in economics?
comparing marginal benefits and marginal costs
The assumption that factors other than those being considered did not change is known as the __________ assumption.
The assumption that factors other than those being considered did not change is known as the __________ assumption.
Which of the following best describes microeconomics?
Which of the following best describes microeconomics?
Normative economics deals with factual statements that can be empirically tested.
Normative economics deals with factual statements that can be empirically tested.
What fundamental problem does the 'economizing problem' address?
What fundamental problem does the 'economizing problem' address?
What does a budget line demonstrate?
What does a budget line demonstrate?
An unattainable combination lies inside the budget line.
An unattainable combination lies inside the budget line.
Resources are __________, so choices must be made.
Resources are __________, so choices must be made.
Which of the following best describes "opportunity cost?"
Which of the following best describes "opportunity cost?"
Purposeful behavior assumes that people make decisions with random outcomes in mind.
Purposeful behavior assumes that people make decisions with random outcomes in mind.
What are the four categories of economic resources?
What are the four categories of economic resources?
Special human resource distinct from labor is known as __________ ability.
Special human resource distinct from labor is known as __________ ability.
Which of the following is NOT an assumption of the production possibilities model?
Which of the following is NOT an assumption of the production possibilities model?
A point outside the production possibilities curve represents an attainable level of production with current resources and technology.
A point outside the production possibilities curve represents an attainable level of production with current resources and technology.
What shape does the production possibilities curve usually have and why?
What shape does the production possibilities curve usually have and why?
The law of __________ states that as more of a particular good is produced, its marginal opportunity costs increase.
The law of __________ states that as more of a particular good is produced, its marginal opportunity costs increase.
What does the optimal output occur?
What does the optimal output occur?
Increases in resources or improvements in technology would shift the production possibilities curve inward.
Increases in resources or improvements in technology would shift the production possibilities curve inward.
What does international trade enable countries to do regarding their production possibilities?
What does international trade enable countries to do regarding their production possibilities?
According to economists, to avoid the pitfall of _________, one must be careful about assuming that because two events occur together, one caused the other.
According to economists, to avoid the pitfall of _________, one must be careful about assuming that because two events occur together, one caused the other.
Match the following concepts with their definitions:
Match the following concepts with their definitions:
Which of the following is an example of the 'post hoc fallacy'?
Which of the following is an example of the 'post hoc fallacy'?
Biases and loaded terminology do not affect economic reasoning.
Biases and loaded terminology do not affect economic reasoning.
What is the purpose of the scientific method in the context of economics?
What is the purpose of the scientific method in the context of economics?
Economic principles are often expressed as __________, describing typical behaviors or outcomes.
Economic principles are often expressed as __________, describing typical behaviors or outcomes.
Which of the following activities is primarily the responsibility of entrepreneurs?
Which of the following activities is primarily the responsibility of entrepreneurs?
What does the term 'ceteris paribus' mean in economic models?
What does the term 'ceteris paribus' mean in economic models?
Match the following:
Match the following:
Flashcards
Economics
Economics
The social science concerned with making optimal choices under conditions of scarcity.
Scarcity
Scarcity
Resources are limited, forcing choices and trade-offs.
Opportunity Cost
Opportunity Cost
The value of the next best alternative when a decision is made.
Purposeful Behavior
Purposeful Behavior
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Marginal Analysis
Marginal Analysis
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Scientific Method
Scientific Method
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Ceteris Paribus Assumption
Ceteris Paribus Assumption
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Microeconomics
Microeconomics
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Macroeconomics
Macroeconomics
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Positive economics
Positive economics
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Normative Economics
Normative Economics
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Economizing Problem
Economizing Problem
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Production Possibilities Model
Production Possibilities Model
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Land (Economic Resource)
Land (Economic Resource)
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Labor (Economic Resource)
Labor (Economic Resource)
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Capital (Economic Resource)
Capital (Economic Resource)
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Entrepreneurial Ability
Entrepreneurial Ability
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Production Possibilities Curve
Production Possibilities Curve
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Increasing Opportunity Costs
Increasing Opportunity Costs
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Optimal Output
Optimal Output
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Economic Growth
Economic Growth
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International Trade
International Trade
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Fallacy of Composition
Fallacy of Composition
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Correlation vs. Causation
Correlation vs. Causation
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Study Notes
Economics
- Economics: defined as a social science studying optimal decisions amid scarcity.
- Economic wants surpass society's ability to produce.
The Economic Perspective
- Envisions individuals and institutions making rational, self-interested decisions.
- Considers scarcity, choice, opportunity cost, purposeful behavior for increased utility, and marginal analysis.
- Scarcity necessitates choices.
- Choices incur opportunity costs.
- Purposeful behavior aims for rational self-interest, utility for individuals, and profit for firms.
- Marginal analysis involves comparing extra benefits to extra costs.
Theories, Principles, and Models
- The scientific method systematically pursues knowledge through observation, hypothesis formulation, testing, and modification.
- Economic principles are generalizations, often using the "other-things-equal" or "ceteris paribus" assumption.
Microeconomics and Macroeconomics
- Microeconomics: study of individual consumers, firms, or markets.
- Macroeconomics: the study of the entire economy or its major aggregates.
- Positive economics: Economic statements that are factual
- Normative economics: Economic statements that involve value judgments
The Economizing Problem
- The economizing problem is defined by limited income and unlimited wants,
- The budget line illustrates attainable and unattainable combinations, trade-offs, opportunity costs, and choices, subject to income changes.
Society's Economizing Problem
- Economic resources are categorized into land, labor, capital (investment), and entrepreneurial ability.
- Land: all-natural resources
- Labor: consists of physical and mental activities contributing to production.
- Capital: all human-produced physical objects and intangible ideas.
- Entrepreneurial ability: a special human resource distinct from labor.
- Entrepreneurs employ factors of production, take initiative, make strategic decisions, innovate, and take risks.
Production Possibilities Model: Overview
- An economic model showing combinations of two goods an economy can produce, assuming full employment, fixed resources, and technology.
- The model considers consumer and capital goods.
- The production possibilities curve illustrates these combinations.
Increasing Opportunity Costs
- As production of a particular good increases, its marginal opportunity costs rise, demonstrated by the concave shape of the production possibilities curve.
Optimal Output
- Optimal output exists where marginal benefit equals marginal cost (MB = MC).
Unemployment, Growth, and the Future
- Economic growth shifts the production possibilities curve outward.
Pitfalls to Sound Economic Reasoning
- Common pitfalls include biases, loaded terminology, fallacy of composition, post hoc fallacy, and confusing correlation with causation.
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