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Questions and Answers
What does microeconomics focus on?
What does microeconomics focus on?
- National economy as a whole
- Market mechanisms and relative prices
- Growth, inflation, and unemployment
- Individual markets, sectors, or industries (correct)
What is one goal of microeconomics?
What is one goal of microeconomics?
- Analyzing market mechanisms and relative prices (correct)
- Dealing with national policies on growth and inflation
- Analyzing effects of market failure
- Studying the sum total of economic activity
What does macroeconomics focus on?
What does macroeconomics focus on?
- Market mechanisms and relative prices
- Sum total of economic activity (correct)
- National policies relating to market failure
- Individual markets, sectors, or industries
When does microeconomics show conditions under which free markets lead to desirable allocations?
When does microeconomics show conditions under which free markets lead to desirable allocations?
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What does microeconomics analyze in relation to market failure?
What does microeconomics analyze in relation to market failure?
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Study Notes
Microeconomics
- Focuses on the behavior and decision-making of individual economic units such as households, firms, and markets
- One of its goals is to identify the conditions under which free markets lead to efficient allocation of resources
Macroeconomics
- Focuses on the economy as a whole, studying aggregated indicators such as GDP, inflation, and unemployment rates
Market Failure
- Microeconomics analyzes market failure, which occurs when the market fails to allocate resources efficiently
- Conditions under which free markets lead to desirable allocations are identified, such as perfect competition and no externalities
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