ch 1 micro econ exam

The branch of economics which studies the behavior or entire economies is

macroeconomics.

Economics reason that the optimal decision is to continue any activity up to the point where the

marginal benefit equals the marginal cost

An economic ______ is a simplified version of some aspect of economic life used to analyze an economic issue.

model

Every society faces economic trade-offs. This means

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

In a market economy, those who are willing and able to buy what is produced

receive the most of what is produced.

By definition, economics is the study of

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

Opportunity cost is defined as

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

Which of the following is a problem inherent in centrally planned economies?

Production managers are more concerned with satisfying government's orders than with satisfying consumer wants.

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

Productive efficiency

Which of the following correctly describes the relationship between economic efficiency and economic equity?

There is often a trade-off between the two.

Which of the following is a macroeconomics question?

What determines the growth rate of gross domestic products?

Which of the following is a macroeconomics question?

What determines the inflation rate?

Which of the following is a microeconomics question?

What factors determine the price of carrots?

Economic models

are simplified versions of reality.

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

choices, scarce

The decision about what goods and services will be produced in a market economy is made by

consumers and firms choosing which goods and services to buy or produce

Microeconomics is the study of

how households and firms make choices.

Scarcity refers to the situation in which

unlimited wants exceed limited resources.

The three fundamental questions that any economy must address are

what good and services to produce, how will these goods and services be produced, and who receives them.

Allocative efficiency best explains ______ and productive efficiency best explains _____.

what will be produced, how something will be produced

________ increases economic efficiency because it forces firms to produce and sell goods and services as long as the additional benefit to consumers is greater than the additional cost of production.

Competition

A grocery store sells a bag of potatoes at a fixed price of $2.30. Which of the following is a term used by economists to describe the money received from the sale of an additional bag of potatoes?

Marginal revenue

Consider the following economic agents: the government, consumers, producers. Who, in a centrally planned economy, decides what goods and services will be produced with the scarce resources available in that economy?

The government

Which of the following is a positive economic statement?

The minimum wage law causes unemployment.

Which of the following is a normative economic statement?

The price of gasoline is too high.