Microeconomics Chapter 1

The quality of an economic model can be measured by how well it reflects reality and whether it gives us insights that can be used in the real world. Multiple select questions. (A) the level of official central bank involvement. (B) whether it gives us insights that can be used in the real world. (C) how well it reflects reality. (D) the level of official government involvement.

B C

___________ cost is most plainly visible when spending more money on one thing means that less money can be spent on another thing.

Opportunity

_____________ -interest is the idea that people choose to do the things that interest them.

Self

Evaluate the following statement: "I love ice cream. But I've eaten so much ice cream today, I can't possible eat another cup."

The marginal benefit of eating ice cream is falling.

Individuals and businesses must choose between the different uses for their available resources. This is called ______ resources and is due to the concept of ______.

allocating; scarcity

When resources are allocated in such a way that it is possible to increase the production of one good only by decreasing the production of another, then the allocation of resources is:

efficient

Graphing the information in the production possibilities schedule produces the production possibilities:

frontier

Economics is about:

how people make choices in a world of scarcity.

As the amount of an activity increases, its marginal cost:

increase

When resources are allocated in such a way that it is possible to increase the production of one good without decreasing the production of another, then the allocation of resources is:

inefficient

Combinations lying _________ the production possibilities frontier are possible but inefficient with the current resources and technology

inside

The additional benefit associated with one more unit of an activity is the _____ benefit.

marginal

When you decide - after studying for three hours - that another hour of sleep is more beneficial to you than a fourth hour of studying, you are engaging in:

marginal decision making

When you decide to turn off the bedroom light on your way to the kitchen so that you can save a little money on your electric bill, you are engaging in:

marginal decision making

Combinations inside the production possibilities frontier are:

possible but inefficient

A graph that shows the possible combinations of two different goods or services that can be produced with fixed resources and technology is the:

production possibilities frontier

The production possibilities frontier, or curve, is a graphical representation of the

production possibilities schedule

Self-interest, marginal decision making, and optimization form the basis for:

rational decision making

Because the world is characterized by scarcity, people must allocate the limited __________ at their disposal among many competing uses.

resources

The points on the production possibilities frontier show how we allocate our scarce __________ to the production of two different goods or services.

resources

Economics is the study of how individuals and societies allocate

scarce resources among many competing users.

A common economic situation where an economy's resources are insufficient to meet the existing wants and must be used judiciously is referred to as ______.

scarcity

The term _____________ describes the fact that unlimited wants cannot be completely satisfied with limited resources.

scarcity

A strong economic model allows us to analyze the economic events of the world by:

simplifying a very complex economic world.

Equilibrium occurs when:

the marginal benefit equals the marginal cost.

There is no incentive to either increase or decrease the level of the activity performed when:

the marginal benefit equals the marginal cost.

The marginal benefit of an activity can be found by calculating the change in:

total benefits as the level of the activity increases by one unit