Economics - Chapter 1

What is a positive analysis?

"What is"

When you think of an arrangement or institution that brings buyers and sellers of a good or service together, what are you thinking of?

A market

According to the rationality assumption, people:

Do not intentionally make decisions that would leave them worse off

Economic decisions are made at every level in society. When we try to decide which production method to use among several alternatives, which of the following key economic questions are we trying to answer?

How do we produce the products?

Economics is the study of choice under conditions of:

Scarcity

The principle of opportunity cost evolves from the concept of:

Scarcity

What is macroeconomics?

The study of the economy as a whole

The United States economy is best classified as a:

mixed economy

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

Capital

________ is concerned with how people respond to incentives

Economics

Tangible products like cars and televisions are referred to as _________.

Goods

What is a central planned government?

Government makes major decisions about production of goods

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

Invention

Economists believe that an individual or firm should continue any activity until:

Marginal benefit is equal to marginal cost

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

Natural Resources

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

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

Physical capital

What is opportunity cost?

the loss of potential gain from other alternatives when one alternative is chosen (if I choose this, i lose this opportunity)