Microeconomics Chapter 1 Flashcards

Questions and Answers

Jim's behavior illustrates which economic principle?

People respond to economic incentives (correct)

Opportunity cost

Supply and demand

Scarcity

__________ goods and services are those bought by businesses to be used to increase efficiency or enhance production.

Capital

What type of economy is the United States best classified as?

Mixed economy

What are the resources provided by nature and used to produce goods and services known as?

Natural resources Signup and view all the answers

Which of the following is not a possible opportunity cost of attending college?

The cost of housing Signup and view all the answers

What is one of the first steps in deciding whether to complete your education?

Evaluate the marginal cost and marginal benefit of that decision Signup and view all the answers

Economics is the study of choice under conditions of?

Scarcity Signup and view all the answers

Macroeconomics is concerned with all of the following except:

Political party affiliation Signup and view all the answers

Tangible products like cars and televisions are referred to as __________.

Goods Signup and view all the answers

When should an individual or firm continue any activity?

Until marginal benefit is equal to marginal cost Signup and view all the answers

Which of the following countries has an economy largely guided by a central planning authority?

North Korea Signup and view all the answers

The principle of opportunity cost evolves from the concept of?

Scarcity Signup and view all the answers

In what type of economy does the government decide how economic resources will be allocated?

A centrally planned economy Signup and view all the answers

Which of the following is a positive economic statement?

If minimum wage rates rise, then unemployment will rise Signup and view all the answers

The stock of computers, factory buildings, and machine tools used to produce goods is known as?

Physical capital Signup and view all the answers

What key economic question do we try to answer when deciding on a production method?

How do we produce the products? Signup and view all the answers

What is the name given to the development of a new good?

Invention Signup and view all the answers

Economics is concerned with how people respond to?

Incentives Signup and view all the answers

When thinking of an arrangement that brings buyers and sellers together, what are you thinking of?

A market Signup and view all the answers

According to the rationality assumption, people do not intentionally make decisions that would leave them?

Worse off Signup and view all the answers

Macroeconomics can be used to understand all the topics below, except:

How a consumer decides between two cars Signup and view all the answers

What happens when the federal government creates environmental policies that make it cheaper for firms to follow green initiatives?

The policies are consistent with economic incentives Signup and view all the answers

What is the study of the choices people make to attain their goals, given their scarce resources?

Economics Signup and view all the answers

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

Marginal benefit equals marginal cost Signup and view all the answers

A market is a group of _ and _ of a good or service and the institution of arrangement by which they come together to trade.

Buyers and sellers Signup and view all the answers

Is the pricing decision of Microsoft charging $599 for Windows 7 rational?

Yes, if the managers used all available information to weigh benefits and costs. Signup and view all the answers

What unavoidable fact comes from a reality economists call scarcity?

People must make choices. Signup and view all the answers

What is a centrally planned economy?

An economy in which the government decides how economic resources will be allocated Signup and view all the answers

What is a market economy?

An economy in which decisions are made based on supply and demand Signup and view all the answers

Study Notes

Economic Principles and Incentives

Individuals respond to economic incentives; for instance, Jim chose to participate in a paid health study.
Marginal analysis involves weighing the additional benefits and costs of decisions, critical for educational choices.

Types of Goods and Services

Capital goods are utilized by businesses to enhance efficiency and production.
Tangible products like cars and televisions are termed "goods."

Economic Classifications

The U.S. economy is classified as a mixed economy, combining elements of both market and planned economies.
North Korea represents an economy with resource allocation primarily determined by a central planning authority.

Fundamental Economic Concepts

Natural resources are the raw materials provided by nature for producing goods and services.
Opportunity cost arises from scarcity and represents the next best alternative foregone when making a choice.

Economic Decisions and Market Structures

CEntrally planned economies have the government decide on resource allocations.
A market is defined as a system where buyers and sellers interact to trade goods or services.

Macroeconomics and Economic Statements

Macroeconomics differentiates between various broad topics, excluding consumer choices in specific product purchases.
Positive economic statements, like the correlation between minimum wage and unemployment, are objective and testable.

Economic Models and Rationality

People generally act rationally, avoiding decisions that would intentionally leave them worse off.
Physical capital includes tangible assets like computers and machinery used in production processes.

Policy Implications and Environmental Economics

Economic policies encouraging green initiatives align with market incentives, reducing operational costs for firms.

The Study of Economics

Economics explores how individuals make choices to meet goals with limited resources, focusing on responding to incentives and managing scarcity.

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Description

Test your knowledge with these flashcards on key concepts from Chapter 1 of Microeconomics. Each card presents an important economic principle or term, providing a quick and engaging way to reinforce your understanding of the material. Perfect for reviewing before exams or class discussions.