Macroeconomics: Chapter 1 Homework

The fair distribution of economic benefits.

Equity

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

Opprotunity cost

Three Fundamental Question

1) What goods and services will be produced 2) How will the goods and services be produced? 3) Who will receive the goods and services produced?

Where production is consistent with consumer preferences.

Allocative Efficiency

A market is a group of _______and______of a good or service and the institution of arrangement by which they come together to trade

Buyers and sellers

An economy in which the government decides how economic resources will be allocated.

Centrally Planned Economies

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

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

Deciders on what goods and services will be produced?

Consumers, firms, and government

The study of the choices people make to attain their goals, given their scarce resources.

Economics

Question 1 Explanation

Economists emphasize that consumers and firms consistently respond to economic incentives. When a consumer or a firm responds to economic​ incentives, they choose more over less. If everything else is​ equal, consumers and firms choose the option that provides the most money.​ So, ceteris paribus​, ​(everything else​ equal) people choose the option that returns the highest net monetary benefits.

Question 3 Explanation

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. Economists reason that the optimal decision is to continue any activity up to the point where the marginal benefit equals the marginal cost—in ​symbols, where MB​ = MC. Marginal analysis involves comparing marginal benefits and marginal costs.

is harder to define than​ efficiency, but it usually involves a fair distribution of economic benefits. For some​ people, equity involves a more equal distribution of economic benefits than would result from an emphasis on efficiency alone.

Equity

Who receives goods and services in the US depends largely on

How income is distributed

The economy as a whole, such as how rapidly the economy grows. topics such as inflation, unemployment and economic growth.

Macroeconomics

Which of the following covers the study of topics such a inflation or unemployment?

Macroeconomics

Firms choose how to produce the goods and services they sell. In many​ cases, firms face a​ trade-off between using more workers or using more machines. For​ example,

Many times in the past several​ decades, firms may have chosen between a production method in the United States that uses fewer workers and more machines and a production method in China that uses more workers and fewer machines.

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

Marginal benefits equals marginal cost.

When the decisions of households and firms determine what is being produced, how its produced, and how much is produced.

Market Economies

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

Microeconomics

An economy in which most economic decisions result from the interactions of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

Mixed Economy

An economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

Mixed economy

Where goods and services are produced at the lowest possible cost.

Product Efficiency

Question 5 Explanation

Rationality is the assumption economists make that consumers and firms use all available information as they act to achieve their goals. Rational individuals weigh the benefits and costs of each​ action, and they choose an action only if the benefits outweigh the costs.

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 economists calls...

Scarcity

Economic Models are

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

When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives..

The economic policies are consistent with economic incentives

Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?

When we assume the managers at Microsoft have used all available information and weighed all known benefits and costs, we are assuming rationality.

An opinion columnist in the Washington Post argues that the Stop Bad Employers by Zeroing Out Subsidies Act is​ "virtually guaranteed to hurt the very​ low-income working families its sponsors want to​ help." ​Source: Catherine​ Rampell, "Tax Bezos. Help Workers. But Not Like​ This." Washington Post​, September​ 6, 2018. a. What was the main provision of this​ act? A. Firms with more than 200​ full-time employees must offer health insurance to its employees and must automatically enroll them in the plan. Your answer is not correct. B. Every resident of the United States had to have health insurance that met certain basic requirements. Individuals who did not acquire health insurance were subject to a fine. C. Firms whose employees received assistance from government​ benefits, including Medicaid and the Supplemental Nutrition Assistance Program​ (SNAP), would be required to pay a tax equal to cost of the assistance. This is the correct answer. D. Firms with 50 or more​ full-time employees must offer health insurance that meets certain requirements or pay a fee to the federal government for every employee who receives a tax credit from the federal government for obtaining health insurance through a health insurance marketplace. b. Why would the columnist argue that the act was more likely to hurt than help​ low-income families? A. Employees who were previously receiving assistance from government benefits would automatically lose those benefits because they had a job. B. In​ effect, the act would lower the cost of employing​ low-income workers who receive government benefits. C. Firms that might otherwise have hired a​ low-wage worker may now be reluctant to do so because the firms could be liable for paying the tax. This is the correct answer. D. All of the above. Your answer is not correct. c. If the columnist is​ correct, why did the sponsors of the act in Congress write the act the way that they​ did? A. The sponsors of the legislation assumed that firms would not pay attention to these changes in costs and therefore​ wouldn't consider them when making hiring decisions. B. The sponsors of the legislation may have hoped that firms would lower the wages of​ low-income workers to offset the cost of the tax that they would be responsible for paying. C. The sponsors of the legislation may have hoped that firms would raise the wages of​ low-income workers, which would make it unnecessary for these workers to apply for government benefits. Your answer is correct. D. The sponsors of the legislation assumed that this tax would be so negligable that it​ wouldn't impact hiring decisions.

a. c b. c c. c

Economic models make ________ about the motives of consumers and firms.

behavioral assumptions

Economists assume

consumers will buy the goods and services that will maximize their well-being or their satisfaction and that firms act to maximize their profits.

is something measurable that can have different values.

economic variable

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost

Economics is a social science because

it applies the scientific method to the study of the interactions among individuals, it considers human behavior-particulary decision-making behavior, and it is based on studying the actions of individuals.

Any model is based on making assumptions because

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

Concerned with "What ought to be"

normative analysis

Concerned with "what is" Measures the cost and benefits of different coerces of action

positive analysis

Economics is about ____, which measures the cost and benefits of different course of action.

positive analysis

Unlimited wants exceed unlimited resources available.

scarcity

A hypothesis in an economic model is

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