Chapter 1 Homework

______ is the study of the choices people make to attain their goals, given their scarce resources.

Economics

Societies organize their economies in two main ways to answer the three questions of what, how, and who. A society can have a _____ (market, centrally planned) economy in which the government decides how economic resources will be allocated. Or a society can have a _____ (market, centrally planned) economy in which the decisions of households and firms interacting in markets allocate economic resources.

centrally planned; market

Suppose in an effort to prevent the population from declining, Italy began offering new mothers extended periods of paid family leave from work and, consequently, the birthrate per woman increases. If so then this could best be characterized as an example of people responding to: a. economic incentives b. compassion c. accounting principles d. religious beliefs e. envy

economic incentives

When economists develop models designed to explain the choices people make, they generally assume that a. people make the best decisions b. consumers do not act to achieve their goals c. consumers do not use all available information d. people are rational e. everyone knows everything

people are rational

A large corporation that runs nursing homes estimates that changes to Medicare will result in lower payments by Medicare to nursing homes for short-term stays by patients that require therapy or care up on leaving hospitals. Assume the corporation is considering expanding the number of "beds" it offers at its nursing homes. Given the changes to Medicare, if the marginal benefit of offering an additional bed is $6,000 and the marginal cost is $2,000 per bed, then the corporation (should, should not) offer additional beds.

Should

A market is a group of ______ of a good or service and the institution or arrangement by which they come together to trade.

buyers and sellers

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when a. marginal benefit is maximized b. marginal benefit is greater than marginal cost c. marginal benefit equals marginal cost d. marginal cost is zero

marginal benefit equals marginal cost

One of the basic facts of life is that people must make choices as they try to attain their goals. This unavoidable fact comes from a reality an economist calls a. scarcity b. economics c. rationality d. the market

scarcity