Macroeconomics Chapter 1
Every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn $600000 next year playing for a minor league baseball team, $300000 next year playing for a European professional football team, or $0 returning to college for another year. The opportunity cost of the student-athlete returning to college next year is
600000
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.
a hypothesis in an economic model is
a statement that may be either correct or incorrect about an economic variable, usually about a causal relationship, tested before it can be accepted (or not rejected)
__________ is the study of the choices people make to attain their goals, given their scarce resources
economics
When does allocative efficiency occur?
Allocative efficiency occurs when production is in accordance with consumer preferences.
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.
economics is a social science because
It is based on studying the actions of individuals, It applies the scientific method to the study of the interactions among individuals, It considers human behavior—particularly decision-making behavior.
Today which of the following countries has a centrally planned economy
North Korea
Trade-offs force society to make choices, particularly when answering the following three fundamental questions:
One, what goods and services will be produced? Two, how will the goods and services be produced? Three, who will receive the goods and services produced?
When does productive efficiency occur?
Productive efficiency occurs when a good or service is produced at the lowest possible cost.
Opportunity cost is
The highest-valued alternative that must be given up to engage in an activity.
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.
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
How are economic resources allocated in a market economy?
by the decisions of households and firms interacting in markets
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
Suppose an analyst estimates the gains to workers from minimum wage ______. This is an example of ___________.
laws ; positive analysis
Which of the following is not a step economists follow when developing an economic model?
make value judgements to be proven or disproven
Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when
marginal benefit equals marginal cost
Any model is based on making assumptions because
models have to be simplified to be useful, we cannot analyze an economic issue unless we reduce its complexity
When economists develop models designed to explain the choices people make, they generally assume that
people are rational
__________ 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
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
A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for short-term stays by patients that require therapy or care upon leaving hospitals. Assume the corporation is considering expanding the number of "beds" it offers at its nursing homes. Given the changes to Medicare, if the marginal benefit of offering an additional bed is $6000 and the marginal cost is $2000 per bed, then the corporation ____________ offer additional beds.
should
equity is
the fair distribution of income
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
When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives,
the policies are consistent with economic incentives
macroeconomics is
the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth.
