Chapter 1 HW Questions

Economists often are interested in percentage change from one period to the next. The percentage rate of change of gross domestic product​ (GDP) is an important macroeconomic variable. If in 2010 GDP was​ $11,150 billion​ dollars, and GDP increased to $11,243 billion in​ 2011, what is the growth rate of the U.S. economy in​ 2011?

.83%

The area of a rectangle is

A = L x W

Societies organize their economies in two main ways to answer the three questions of​ what, how, and who. A society can have a ____________ economy in which the government decides how economic resources will be allocated. Or a society can have a _____________ economy in which the decisions of households and firms interacting in markets allocate economic resources.

Centrally planned; Market

________ , __________ , and _________ decides what goods and services will be produced

Consumers, firms, government

Which of the following covers the study of topics such as inflation or​ unemployment?

Macroeconomics

__________ is concerned with what is​, and ________ is concerned with what ought to be. Economics is about __________ which measures the costs and benefits of different courses of action.

Positive analysis; normative analysis; Positive analysis

Revenue is calculated by

Price x Quantity

________ occurs when a good or service is produced at the lowest cost possible. __________ occurs when the product is in accordance with consumers preference.

Productive efficiency; Allocative efficiency

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls

Scarcity

Opportunity cost is

The highest-valued alternative that must be given up to engage in an activity.

Trade-offs force society to make choices, particularly when answering the following three fundamental questions:

What, How, Who

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

buyers and sellers

Microeconomics is

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

Economics

is the study of the choices people make to attain their​ goals, given their scarce resources.

Economics is a social science because

it applies the scientific method to the study of the interactions among individuals, it considers human behavior-particularly decision-making behavior, and it is based on studying the actions of individuals.

An optimal decision occurs when

marginal benefit equals marginal cost

A __________ economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

mixed

Equity is

the fair distribution of economic benefits

Macroeconomics is

the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth

Any model is based on making assumptions because

we cannot analyze an economic issue unless we reduce its complexity and models have to be simplified to be useful.