Microeconomics Chapter 1 Flashcards

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Questions and Answers

What does the word 'utility' mean for economists?

Pleasure or satisfaction.

How may economics best be defined?

Social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

When should you decide to go to a movie?

If the marginal benefit of the movie exceeds the marginal cost.

Why do opportunity costs exist?

The decision to engage in one activity means forgoing some other activity. Signup and view all the answers

What is the scientific method?

Used by economists and other social scientists, as well as by physical scientists and life scientists, to formulate and test hypotheses. Signup and view all the answers

What does the Latin term 'ceteris paribus' mean?

Other things equal. Signup and view all the answers

From which viewpoint does macroeconomics approach the study of economics?

The entire economy. Signup and view all the answers

What is microeconomics concerned with?

A detailed examination of specific economic units that make up the economic system. Signup and view all the answers

What is a normative statement?

Based on value judgments. Signup and view all the answers

What is a positive statement?

Objective and is based on facts. Signup and view all the answers

The statement 'Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity' is positive and correct.

True Signup and view all the answers

What is the economizing problem?

The need to make choices because economic wants exceed economic means. Signup and view all the answers

What are the four factors of production?

Land, labor, capital, and entrepreneurial ability. Signup and view all the answers

Why is money not considered an economic resource?

Money, as such, does not produce anything. Signup and view all the answers

What does the production possibilities curve illustrate?

If all the resources of an economy are in use, more of one good can be produced only if less of another good is produced. Signup and view all the answers

What indicates unemployment on the production possibilities curve?

A point inside the production possibilities curve. Signup and view all the answers

What does any point inside the production possibilities curve indicate?

That more output could be produced with the available resources. Signup and view all the answers

What does the law of increasing opportunity costs state?

If society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so. Signup and view all the answers

What does the concept of opportunity cost suggest?

The use of resources in any particular line of production means that alternative outputs must be forgone. Signup and view all the answers

How can the point on the production possibilities curve that is most desirable be found?

By comparing marginal benefits and marginal costs. Signup and view all the answers

Study Notes

Economic Concepts and Definitions

Utility refers to the pleasure or satisfaction derived from consuming goods or services.
Economics is a social science focused on how individuals and societies make optimal choices under scarcity.
Marginal Benefit vs. Marginal Cost: Choose to engage in an activity, like going to a movie, when the marginal benefit exceeds the marginal cost.
Opportunity Costs arise when choosing one activity means forgoing another due to limited resources.
Scientific Method: Employed by economists to formulate and test hypotheses, paralleling methods in physical and life sciences.
Ceteris Paribus: Latin term meaning "other things equal," used to analyze the effect of one variable while holding others constant.

Microeconomics vs. Macroeconomics

Macroeconomics examines the economy as a whole, focusing on aggregate outcomes.
Microeconomics deals with the behavior of individual economic units within the economic system.

Types of Economic Statements

Normative Statements: Based on value judgments; they express opinions about what ought to be.
Positive Statements: Objective claims based on factual evidence, describing what is or what will be.

Economic Principles and Problems

Economizing Problem: Necessity to make choices as wants exceed means.
Factors of Production: Comprise land, labor, capital, and entrepreneurial ability—essential resources for production.
Money: Not classified as an economic resource since it does not produce goods or services.

Production Possibilities Curve (PPC)

PPC Principle: Represents the trade-off in producing more of one good at the expense of another when resources are fully utilized.
Points inside the PPC indicate underutilization of resources, suggesting potential for increased output.
Law of Increasing Opportunity Costs: Suggests that producing additional units of a good requires greater sacrifice of another good over time.
Opportunity Cost Concept: Reflects that utilizing resources for one purpose limits alternative production.
The optimal production point on the PPC is determined by comparing marginal benefits and marginal costs to find the most beneficial combination of goods produced.

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Description

Test your knowledge of key concepts from Microeconomics, Chapter 1. This quiz covers definitions related to utility, economic principles, and decision-making regarding choices under scarcity. Perfect for students looking to reinforce their understanding of foundational economic terms.