Macroeconomics Chapter 1
True
(T-or-F) Competition forces firms to produce and sell products as long as the marginal benefit to consumers exceeds the marginal cost of production
False
(T-or-F) Economic models portray reality in all its minute details
True
(T-or-F) Every individual, no matter how rich or poor, is faced with making trade-offs.
False
(T-or-F) Only individuals face scarcity; firms and the government do not
False
(T-or-F) There is much more disagreement among economists over positive economic analysis than over normative economic analysis.
What will be produced; how something will be produced
Allocative efficiency best explains _____, and productive efficiency best explains ______
Model
An economic ____ is a simplified version of some aspect of economic life used to analyze an economic issue
even though people may not behave rationally all the time
Economists assume that rational behavior is useful in explaining choices people make
Marginal benefit equals the marginal cost
Economists reason that the optimal decision is to continue any activity up to the point where the....
The government decides because North Korea is a centrally planned economy
How are the fundamental economic decisions determined in North Korea?
Scarcity
In economics, choices must be made because we live in a world of
economic benefits are distributed fairly
In economics, the term "equity" means
Marginal
In economics, the term ____ means "additional" or "extra"
weighing the costs and the benefits of a decision before deciding if it should be pursued
Making optimal decisions "at the margin" requires...
competition and voluntary exchange
Markets promote....
How households and firms make choices
Microeconomics is the study of...
Trade-Offs
The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of...
Market
The term ____ in economics refers to a group of buyers and sellers of a product and the arrangement by which they come together to trade.
Allocative Efficiency
When production reflects consumer preferences, _____ occurs.
Productive Efficiency
_____ is a situation in which a good or service is produced at the lowest possible cost.
Who will receive the goods and services produced
the distribution of income primarily determines which of the fundamental economic questions?