Microeconomics Quiz

The state where resources are limited compared to the wants they can fulfill.

Things used to produce goods and services, including natural, human, and capital resources.

The ability to create something new or improve existing processes.

The ability to arrange resources and take on risks to start or grow a business.

The analysis of how people make choices about their wants and limited resources, aiming to maximize their gains.

The condition where resources can be used for multiple purposes, each with different levels of benefit.

The process of comparing different choices and their potential outcomes to make the best decision.

The goal of maximizing gains, which often involves balancing costs and benefits.

Microeconomics focuses on the economic decisions of individuals, households, and companies, examining how they behave as consumers, producers, and resource owners.

The theory of demand is a key part of microeconomics that examines how individual consumers choose between different goods and services. It answers questions like: What factors influence a consumer's choice? How much are they willing to buy at different prices?

The theory of supply explores how producers decide what and how much to produce. It delves into factors that affect production, such as costs, technology, and market prices.

The theory of price determination, often referred to as price theory in microeconomics, combines demand and supply to explain how prices of goods and services are set in a market. It analyzes how the interaction of buyers and sellers results in an equilibrium price and quantity.

The theory of distribution, also known as factor-price determination, examines how the income generated from production (like wages for labor, profits for capital, and rent for land) is distributed among different factors of production.

Positive science focuses on describing and explaining economic phenomena as they are, using objective data and analysis. It aims to understand what is happening without passing judgment on its desirability.

Normative science deals with what should be or what ought to be in economics. It involves value judgments, ethical considerations, and recommendations for policy based on what is considered best for the society.

Microeconomics can be considered both a positive and normative science. It can analyze and describe how economic actors behave (positive) and offer recommendations for policy interventions to improve efficiency or equity (normative).

A branch of economics that focuses on individual decisions, markets, and the interactions between them.

A question that explores what should be done based on values and judgments about what is good or bad for society .

A question that focuses on how things work and can be measured without making value judgments.

A branch of economics that examines how prices are determined in markets based on factors like supply and demand.

A branch of economics that uses value judgments to suggest what actions should be taken to achieve desired outcomes.

The overall costs and benefits to society, considering individual impacts as well as externalities.

Measures taken to control and regulate economic activities based on social values and desired outcomes.

Economics as a positive science focuses on analyzing and explaining economic phenomena as they exist.

Microeconomics as a positive science focuses on the behavior of individual economic units (consumers, firms) and their interactions within the market.

Economic theories in positive science aim to predict economic outcomes based on observed relationships and conditions.

Economics as a normative science explores what economic outcomes are desirable or ethically ideal, evaluating existing situations.

Microeconomics as a normative science examines the ethical or social implications of economic decisions and how they influence the well-being of society.

Normative economics uses ethical judgments and values to evaluate economic situations and propose policy recommendations.

Microeconomics as a normative science can be applied to assess the impact of government policies on the welfare of individuals and society.

The interplay of positive and normative perspectives in microeconomics allows us to use economic analysis to understand the world and make informed decisions about economic policies.

Economic theories are developed through research on economic phenomena, using observation, data collection, analysis, and prediction to understand cause-and-effect relationships between economic variables.

A model is a simplified representation of reality that uses logic, graphs, or equations to show relationships between economic variables. It helps economists analyze theories and make predictions.

The process of creating a theory or hypothesis by identifying the relationship between two or more variables.

Variables in economic models that are assumed to remain constant during the analysis.

The first step in economic analysis is to clearly define the specific problem or economic phenomenon that will be studied.

A statement that suggests a cause-and-effect relationship between economic variables.

The process of gathering and analyzing data to test the predictions made by a theory or model.

Economic theories help us understand how economic phenomena behave, why they happen, and what their potential consequences are.

The maximum amount of goods and services a country can produce with its available resources and technology, given that all resources are fully employed.

Any point below the PPF represents a situation where resources are not fully employed or are underutilized. This means the country can produce more of both goods.

Any point outside the PPF represents a combination of goods that the country cannot produce with its current resources and technology. It's unattainable.

The value of the next best alternative forgone when a choice is made. It's the cost of choosing one option over another.

The opportunity cost of producing more of one good is the amount of the other good that must be given up. This can be visualized by the slope of the PPF.

The combination of goods a society chooses to produce on the PPF depends on the relative demands for each good. Societies can choose a point on the PPF that best aligns with their needs and preferences.

A shift in the PPF inward represents a decline in the economy's productive capacity. This could be due to factors such as a decrease in resources, technological decline, or natural disasters.

A shift in the PPF outward represents an increase in the economy's productive capacity. This could be due to factors such as an increase in resources, technological advancements, or improvements in worker skills.