Macroeconomics Exam 1 Study Guide

Microeconomics differs from macroeconomics in that microeconomics focuses on:

the choices made by individuals and the implications of those choices.

An economic naturalist is someone who:

applies economic insights to understand everyday life.

The Cost-Benefit Principle indicates that an action should be taken if:

its extra benefit is greater than or equal to its extra cost.

An implication of scarcity is that:

people must make trade-offs.

Positive economic principles are those that:

predict how people will behave.

Economics is best defined as the study of

how people make choices in the face of scarcity and the implications of those choices for society as a whole

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of:

inconsistent reasoning; saving $20 is saving $20.

Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. Her opportunity cost of going to the beach is:

the value she places on seeing the movie.