ECON 222-001 Chapter 1

Which of the following best describes scarcity?

Unlimited wants exceed the limited resources available

Product efficiency means that

A good or service is produced at the lowest possible cost

Their income.

A market system prevents people from getting as many goods and services as they want due to

maximizes benefits to society

Efficiency means that goods are distributed in a way that

fair

Equity means that goods are distribute in a way that is

Allocative efficiency means that

Every good or service is produced up to the point where marginal benefit equals marginal cost.

Economists assume that people are rational in the sense that,

They use all available information as they take actions intended to achieve their goals.

Scarcity is central to the study of economics because it implies that

every choice involves an opportunity cost.

Positive analysis

is concerned with "what is"

Normative analysis

is concerned with "what ought to be"

positive analysis

measures the costs and benefits of different courses of action

Allocative efficiency

occurs when production is in accordance with customer preference

Economics is about

positive analysis

Economic data is used to

test models

Equity is

the fair distribution of economic benefits

Opportunity cost is

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