Unit 2

True or false: In macroeconomics, assumptions are made with unpredictable events.

True

True or false: Scarce resources are available in limited amounts, which causes humans to develop ways of determining how to get these resources

True

True or false: Self-interest produces behavior that benefits others

True

Why is there no such thing as free lunch?

When people choose, they incur an opportunity cost.

Which if the following best describes what we mean by resources in economics? A. Natural resources like gas and trees B. The factors used to produce goods and resources C. Human Resources like workers D. The ability to handle a situation E. Monetary wealth

B

Which of the following are characteristics of a scarce resource? A. The resource has unlimited supply and limited demand B. There is a demand for that resource with a limited supply C. The resource is in demand, but there is no supply of it D. There is a limited supply of a resource with no demand for that resource E there is a fixed quantity of the resource available but no demand for it

B

Which of the following best captures the idea of the fundamental economic problem? A. Infinite resources and limited wants B. Limited resources and unlimited wants C. Unlimited resources and unlimited wants D. Limited wants and limited resources E. Lack of demand for limited resources

B

Which of the following is a macroeconomic question? A. Who are the winners and losers from the imposition of a tax on cigarettes? B. What would be the likely impact of an increase in business taxes on the overall level of inflation in the country C. What is the optimal number of workers for an ice cream shop to employ in the summer months? D. How will a consumer react if their income decreases? E. How many smartphones should Samsung produce this quarter?

B

Which of the following is the best definition of an economic system? A. A set of policies used by government to regulate what is produced B. A model for understanding how economies work C. A mechanism that decides what to make, how to make it, and who gets it D. A model that illustrates the flow of goods and services E. A government program promoting economic growth and development

C

In a market economy, what drives producers to innovate?

Competition

What market force is the regulator of economic activity?

Competition

True or false: in a command economy, there are incentives for producers to innovate.

False

True or false: microeconomics is about assuming people are irrational.

False

True or false: there is competition in a command economy.

False

Normative or positive: Unemployment fell by 1.2% last year.

Positive

Which of the following would best be described as a positive statement? A. Free markets are inherently unfair institutions B. Countries normally experience higher unemployment during recessions C. Business profits should be redistributed through taxes to benefit mire if society D. Increasing taxes is positively wrong E. The focus of government spending should be on improving wellbeing

B

What does Smith say is the main goal for each person?

Be able to gain in his own interest

In a market economy, how is it determined what is produced?

Businesses

Is economics about common sense or deeper thinking?

Common sense

Which of the following is NOT a scarce economic resource? A. Water B. Land C. Labor D. Money E. Capital

D

Which of the following describes a normative statement? A. Rooted in the theories of Keynesian economics B. Rooted in the theories of classical economics C. Based on real world examples D. Based purely on facts and data E. Subjective and value based

E

True or false: Labor is not a scarecrow resource because people are willing to work for free and enough labor exists to meet the wants and needs of all consumers.

False

True or false: in real command economies, they achieved fairness.

False

In a market economy, what is the major characteristic?

Inequality

The Wealth of Nations was written at the same time as what important document?

The Declaration of Independence

What economic book did Adam Smith write?

The Wealth of Nations

Scarcity

The fact that there is a limited amount of resources to satisfy unlimited wants

In a command economy, who decides how is it decided who gets to buy what is being produced? /

The government

In a command economy, who determines what to produce?

The government

In a command economy, who owns the factors of production?

The government

Positive analysis

Analytical thinking about objective facts and cause-and-effect relationships that are testable, such as how much of a good will be sold when a price changes.

Which of the following best describes the difference between microeconomics and macroeconomics? A. Microeconomics is about individuals, households, and firms; macroeconomics is about economies as a whole B. Microeconomics is about how much total output there is in an economy; macroeconomics is about how much individual firms produce C. Microeconomics is about efficiency; macroeconomics is about equity D. Microeconomics markets for financial assets; macroeconomics is about markets for the factors of production E. Microeconomics is about normative analysis; macroeconomics is about positive analysis

A

Ceteris Paribus

A Latin phrase that means "all other things held constant"

Who described the opposing, but complementary forces of self-interest and competition as the invisible hand?

Adam Smith

Economic Resources

All natural, human, and manufactured resources that go into the production of goods and services

Rational decision making

An agent is "rational" if they use all available information to choose an action that makes them as well off as possible; economic models assume that agents are rational.

Sal has many options for how to spend her afternoon. She placed them in order of how much she values them: 1) go to a movie, 2) go to the library, 3) attend a baseball game, and 4) clean her apartment. What is the opportunity cost of going to a movie?

Going to the library

Models

Graphical and mathematical tools created by economists to better understand complicated processes in economics.

In a market economy, some major characteristics are:

Incentives and innovation

In a market economy, how is it determined who gets to buy what is purchased?

Individuals

In a market economy, who owns the factors of production?

Individuals/businesses in the market

What are the four resources that any economic system must allocate between society's competing wants and needs?

Land resources, labor, capital goods, and entrepreneurship

Because people have unlimited wants and limited resources, they must

Make choices about which wants to satisfy

Economic aggregates

Measures such as the unemployment rate, rate of inflation, and national output that summarize all markets in an economy, rather than individual markets; economic aggregates are frequently used as measures of the economic performance of an economy.

In the real world, most economics are what type?

Mixed economies

An opinion

Normative

Normative or positive: Business profits should be redistributed through taxes to benefit more if society

Normative

When you have an aggregate economy you are more focused on ____

Policies

Something that can be proven

Positive

Incentives

Rewards or punishments that motivate particular choices

A person makes a decision or allocates____

Scarce resources

Because of ____ people must make choices, and when they choose, the incur a(n) _____

Scarcity; opportunity cost

What causes people to go to work or school?

Self-interest

What market force is the motivator if economic activity?

Self-interest

Why do some argue that a market economy requires little government regulation?

Self-interest is held in check by competition

Agent

Some entity making a decision; this can be an individual, a household, a business, a city, or even the government of a country.

What is the study of microeconomics?

Study of an individuals

Normative analysis

Subjective thinking about what we should value or a course of action that should be taken, such as the importance of environmental factors and the approach to managing them.

What is an opportunity cost?

The most valued opportunity that you give up when making a choice.

In a market economy, what drives the price of the product

The needs of the market

Macroeconomics

The study of aggregates and the overall commercial output and health of nations

Economics

The study of how individuals and societies choose to allocate scarce resources

What is the best definition of economics?

The study of how society's scarce resources are allocated

What is the study of macroeconomics?

The study of the economy and unemployment

Microeconomics

The study of the interactions between buyers and sellers in the markets for particular goods and services

Why does scarcity exist?

There are not enough resources to produce everyone's wants

What does it mean to say a resource is scarce?

There id not enough of this resource to satisfy all the wants and needs of a society

True or false: economics is based on the concept of scarcity.

True

True or false: the reason the study of economics exists is scarcity

True