Chapter 1

What does the writer mean by "incremental revenue" and "incremental cost"? Why would he focus on incremental revenue and incremental cost rather than on total revenue and total cost? "Incremental" means the same thing as

"marginal." If the marginal revenue exceeds the marginal cost, the USPS's profit will increase. If the marginal cost exceeds the marginal revenue, the USPS's profit will decrease.

Government policymakers use economic principles to make decisions, such as

All of the above

When does allocative efficiency occur?

Allocative efficiency occurs when production is in accordance with consumer preferences.

Which of the following statements is correct? #2

An innovation is the practical application of an invention.

In a market system, how does society decide what goods and services will be produced?

Consumers, firms, and the government determine what goods and services will be produced by the choices they make.

Which of the following statements is correct? #1

Economists use the terms firm, company and business interchangeably.

Economists assume that the only reason people take the actions they do is in response to economic incentives.

False

In a market system, what determines how goods and services will be produced?

Firms determine how goods and services will be produced.

Which of the following is a correct statement about a mixed economy?

In a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources.

Which of the following statements about microeconomics and macroeconomics is correct? #2

Macroeconomics is the study of the economy as a whole.

Which of the following statements about microeconomics and macroeconomics is correct? #1

Microeconomics involves the study of how households and firms make choices.

Today, which of the following countries has a centrally planned economy?

North Korea

When does productive efficiency occur?

Productive efficiency occurs when a good or service is produced at the lowest possible cost.

Which of the following statements about the idea that people are rational is correct?

The idea assumes that consumers and firms use all available information as they act to achieve their goals.

In a market system, how does society decide who will receive the goods and services produced?

Who receives the goods and services produced depends largely on how income is distributed.

How are economic resources allocated in a market economy?

by the decisions of households and firms interacting in markets

What do economists mean by the word "marginal"?

extra or additional

Economists believe that an activity should be continued up to the point where

the marginal benefit from the activity is equal to the marginal cost.