Econ

Economics promotes which of the following as the way to make the best decision?

Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost.

How are the fundamental economic questions answered in a market economy?

Households and firms interact in markets to decide the answers to these questions.

Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?

I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits.

Absolute advantage

If you can produce more of something than others with the same resources, you have

Marginal

In economics, the term _____ means "additional" or "extra."

factors in economic growth

Increase in labor, capital and technology

In economics, choices must be made because we live in a word of

Scarcity

the situation in which unlimited wants exceed limited resources.

Scarcity

what is expected to occur as the baby-boom generation ages?

The demand for medical services should increase.

marginal cost

The extra cost associated with undertaking an activity

The points outside the production possibilities frontier are

Unattainable

The three fundamental questions that any economy must address are

What goods and services to produce; how will these goods and services be produced; and who receives them?

Fast food restaurants produce a range of menu items such as hamburgers, chicken sandwiches, salads, and french fries. What fundamental economic question are they addressing by offering this range of items?

What to produce?

Production possibilities Frontier

a curve showing the maximum combinations of two good given the resources and technology currently available.

What does the term "marginal" mean in economics?

an additional or extra

Economists assume that individuals

are rational and respond to incentives.

If the marginal cost of producing a television is constant at $200, then a firm should produce this item

as long as the marginal benefit it receives is just equal to or greater than $200.

law of demand

as the price of a good rises, the quantity demanded decreases, holding everything else constant

Ted quits his $60,000-a-year job to be a stay-at-home dad. What is the opportunity cost of his decision?

at least $60,000

Economics is the study of the ________ people make to attain their goals, given their ________ resources.

choices; scarce

Holding everything else constant, an increase in the price of MP3 players will result in

decrease in the quantity of MP3 players demanded.

an outward shift of a nation's production possibilities frontier represents

economic growth

Why Trade?

frees up resources, increases specialization and increases division of knowledge

production possibilities frontier

if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.

what is the difference between an increase in demand and an increase in quantity demanded?

increase in demand is represented by a rightward shift of the demand curve while an increase in quantity demanded is represented by a movement along a given demand curve.

if red bull and monster are considered substitutes then other things equal an increase in the price of red bull will

increase the demand for Monster.

shortages

increases prices

bowed out

increasing opportunity cost

Productive efficiency

is a situation in which a good or service is produced at the lowest possible cost.

A supply schedule

is a table that shows the relationship between the price of a product and the quantity of the product supplied.

Surplus

lowers prices

The branch of economics which studies the behavior of entire economies and policies that affect the economy as a whole is called

macroeconomics.

An office supply store sells a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the sale of an additional ream of paper?

marginal revenue

The slope of a production possibilities frontier

measures the opportunity cost of producing one more unit

The branch of economics which studies how households and firms make choices, interact in markets and how government attempts to influence their choices is called

microeconomics.

taxation

only way to redistribute income (reward of activities)

Specializing in the production of a good or service in which one has a comparative advantage enables a country to

produce a combination of goods that lies outside its own production possibilities frontier.

Every society faces economic trade-offs. This means

producing more of one good means less of another good can be produced.

A critical function of the government in facilitating the operation of a market economy is

setting up and enforcing private property rights.

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

Economics is the study of

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

Adam Smith's Invisible hand

the process by which individuals act in their own self-interest brings

If, in the market for oranges, the supply has increased then

the supply curve for oranges has shifted to the right