Macro ECO Quiz 1

First blank, positive analysis Second blank, normative analysis Third blank, positive analysis

(Positive analysis) is concerned with what is​, and (normative analysis) is concerned with what ought to be. Economics is about (positive analysis)​, which measures the costs and benefits of different courses of action.

First blank, Product efficiency Second blank, Allocative efficiency

(Productive efficiency) occurs when a good or service is produced at the lowest possible cost. (Allocative efficiency) occurs when production is in accordance with consumer preferences.

All of these: usually about a causal relationship. a statement that may be either correct or incorrect about an economic variable. tested before it can be accepted​ (or not​ rejected).

A hypothesis in an economic model is:

Answer is buyers and sellers

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

Microeconomics examines individual markets while macroeconomics examines the economy as a whole.

A primary difference between macroeconomics and microeconomics is:

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

Any model is based on making assumptions because

simplified versions of reality designed to analyze​ "what is" to explain human decision making in any context.

Economic models​ are:

are rational​, respond to​incentives, and make decisions by comparing marginal benefits with marginal costs.

Economics assumes people and​ firms:

marginal benefit equals marginal cost.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

Consumers determine what goods and services are​ produced, firms determine how to produce​ them, and markets determine who will receive them.

How do market economies ultimately determine what goods and services are​ produced, how the goods and services will be​ produced, and who will receive the goods and​ services?

The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a (microeconomic) issue. The effect of higher income taxes on the total amount of consumer spending. This is a (macroeconomic) issue. The reasons for the economies of East Asian countries growing faster than the economies of​ sub-Saharan African countries. This is a (macroeconomic) issue. The reasons for low rates of profit in the airline industry. This is a (microeconomic) issue.

Indicate whether each of the following is primarily a microeconomic issue or a macroeconomic issue.

unemployment

Macroeconomics is most likely to include the study of:

the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.

Macroeconomics is the study of

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

Microeconomics is the study of

scarcity.

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

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

Opportunity cost is:

First blank, centrally planned Second blank, market economy

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

Information about the additional revenue earned and the additional cost incurred from producing 200,000 additional computers is required to answer this question.

Suppose Dell is currently selling 2,000,000 computers per year. ​However, managers at Dell are considering whether to increase production by 200,000 computers. One manager explains that after increasing production by this​ amount, total profit would be​ $100 million. Given this​ information, should Dell increase production by 200,000 computers​?

First blank, macroeconomic Second blank, microeconomic

The level of total investment by firms in new machinery and equipment helps to determine how rapidly the economy grows. This is a (macroeconomic) issue. ​ However, to understand how much new machinery and equipment firms decide to​ purchase, one must analyze the incentives individual firms​ face, which is a (microeconomic) issue.

Both: in centrally planned economies by the government. in market economies by the decisions of households and firms interacting in markets.

What goods and services will be​ produced, how the goods and services will be​ produced, and who will receive the goods and services are​ determined:

Microeconomics

Which of the following areas of economics studies issues such as ways to reduce teenage​ smoking?

Macroeconomics

Which of the following areas of economics studies issues such as whether government intervention is capable of reducing the severity of​ recessions?

Normative analysis is concerned with what ought to be.

Which of the following statements about normative analysis is​ correct?

Positive analysis is concerned with what is.

Which of the following statements about positive analysis is​ correct?