Chapter 1: The Principles and Practice of Economics

Two events, A and B, tend to happen together, i.e., they are correlated. What would best describe their causation.

A and B result from a third event C B cause A, and indirect causation A causes B, a direct causation ALL of these would describe their causation.

Economic activities that are feasible have what characteristics:

Affordable and available

Empiricism is:

Analyzing data or evidence

Facts, measurements, or statistics used to describe something specific are collectively known as:

Data

"People are fundamentally good"

Is a normative statement. A positive statement is a factual assertion which can be tested or confirmed with data. Hence this statement is an opinion based on subjective judgement and so it is normative.

Blank is the study of how households and businesses make choices, how they interact in markets, and how government influences their choices.

Microeconomics

Macroeconomics can be used to understand all of the topics listed below except:

National unemployment trends How the national economy works How a consumer decides between the purchase of two cars(this one) What causes economic booms and recessions

The measure of benefits minus cost is:

Net benefit

Selecting the best feasible option among available manufacturing options is called:

Optimization

What are positive economic statements?

Positive economic statements are statements of fact the imply no value judgement. For example, they don't use the word should.

Economics is

concerned with how people make choices

According to the rationality assumption, people:

Do not intentionally make decisions that would leave them worse off.

An example of subjective judgement would be:

Normative economics is almost always dependent on subjective judgments, which means that normative analysis depends at least in part on personal feelings, tastes, or opinions. So whose subjective judgments do we try to use? Economists believe that the people being advised should determine the preferences to be used. For example, -what level of saving a person will make for future expenditures -the value of a rock from the moon -how much risk one is willing to accept to receive a gain

When an investment counselor advises a client as to the risk/return trade-off on an investment, this type of help is called blank economics

Prescriptive When economic analysis is used to help individual economic agents choose what is in their personal best interest, this type of normative economics is referred to as prescriptive economics.

A free rider is a person who:

Receives benefit from a good without paying for the good

Economics is the study of choice under conditions of:

Scarcity

The principle of opportunity cost evolves from the concept of:

Scarcity

Cost that cannot be recovered and therefore aren't relevant to a decision for a future activity are called blank costs.

Sunk costs

The optimal economic decision is to continue any activity, investing or otherwise, up to the point where:

The additional benefit of the activity is at least more than the additional cost of the activity. The optimal economic decision is to continue any activity, investing or otherwise, up to the point where marginal benefit equals marginal cost. If the marginal benefit is greater than the marginal cost, then you should continue the activity until diminishing marginal returns lower the marginal benefit to the point where it is exactly equal to the marginal cost.

A definition of opportunity cost is

The value of the best thing that you give up to get something else.