ME: Chapter 1

Normative Analysis

Concerned with "What ought to be"

Economics is the study of choice under conditions of:

Economics is the study of choice under conditions of:

In the United​ States, who receives the goods and services produced depends largely on

How income is distributed

Which of the following is a positive economic statement?

If minimum wage rates rise, then unemployment will rise.

What is the name given to the development of a new good?

Invention

Jim declined to take part in a health study on a free basis but changed his mind after being offered $1,000 to participate in the study. Jim's behavior best illustrates which economic principle?

People respond to economic incentives

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

Scarcity

Consumers, firms, and government

decide(s) what goods and services will be produced.

Tangible products like cars and televisions are referred to as

goods

Microeconomics is the study of

how households and firms make​ choices, how they interact in​ markets, and how the government attempts to influence their choices.

Economists use the word marginal to mean an extra or additional benefit or cost of a decision. An optimal decision occurs when

marginal benefit equals marginal cost.

Product Efficiency

occurs when a good or service is produced at the lowest possible cost

Allocative Efficiency

occurs when production is in accordance with consumer preferences.

Neutral analysis

which measures the costs and benefits of different courses of action.

Positive Analysis

Concerned with "what is"

Which of the following countries has an economy where most of the resource allocation is determined by a central planning authority?

North Korea

Economics is about _______ ​, which measures the costs and benefits of different courses of action.

Positive Analysis

Equity is

The fair distribution of economic benefits.

__________ goods and services are those bought by businesses to be used to increase efficiency or enhance production.

capitol

A society can have a ______ economy in which the government decides how economic

centrally planned

One of the first steps in deciding whether to complete your education is to:

evaluate the marginal cost and marginal benefit of that decision.

economics

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

Or a society can have a _____ economy in which the decisions of households and firms interacting in markets allocate economic resources.

market

A ____ economy is an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources.

mixed

The United States economy is best classified as a:

mixed econ

The resources provided by nature and used to produce goods and services are also known as:

natural resources

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

According to the rationality assumption, people:

Do not intentionally make decisions that would leave them worse off.

Opportunity cost is

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

The stock of computers, factory buildings and machine tools used to produce goods is known as:

physical capital

The principle of opportunity cost evolves from the concept of:

scarcity

Macroeconomics is

the study of the economy as a​ whole, including topics such as​ inflation, unemployment, and economic growth.