The Scope of Economics Ch. 1

Economic Agent

An individual or a group that makes choices

Which of the following is not an economic agent?

Corporation Labor Union Charity

According to the rationality assumption people

Do not intentionally make the decision that would leave them worse off

Does a resource have to be luxurious?

Doesn't have to be luxurious to be scarce

Which of the following is a positive economic statement?

If minimum wage rates rise, then unemployment will rise.

"People are fundamentally good."

Is a normative statement

Which of these covers the study of topics such as inflation and unemployment?

Macroeconomics

__________ is the study of how households and businesses make choices, how they interact in markets, and how government influences their choices.

Microeconomics

A free riders is a person who

Receives benefit from a good without paying for the good

Economics is the study of choice under conditions of:

Scarcity

Economics

Study how agents choose to allocate scarce resources and how those choices affect society

Costs that cannot be recovered and therefore aren't relevant to a decision for a future activity are called _______________ costs.

Sunk

Which of the following is not a possible opportunity cost of attending college?

The cost of housing

Scarcity

The situation of having unlimited wants in a world of limited resources

If the president of Colombia commented that "we should do something to reduce inflation in Colombia," this would be an example of:

a normative statement

Economic activities that are feasible have what characteristics:

affordable and available

Empiricism is:

analyzing data or evidence.

Macroeconomics can be used to understand all of the topics listed below, except:

how a consumer decides between the purchase of two different cars

Economics

is concerned with how people make choices

The measure of benefits minus costs is:

net benefit

When an investment counselor advises a client as to the risk/return trade-off on an investment, this type of help is called _______________ economics.

prescriptive

Two events, A and B, tend to happen together i.e. they are correlated what would best describe their causation?

A causes B, a direct causation. B causes A, an indirect causation. A and B result from a third event, C.

Selecting the best feasible option among available manufacturing option is called

Optimization

Macroeconomics is concerned with all of the following except:

Political Party Affiliation

Which of these is a macroeconomic study?

The study of how fast prices in general are rising.

Microeconomics

The study of how individuals, households, firms and governments make choices and how those choices affect prices the allocation of resources and the well-being of other agents

Facts, measurements, or statistics used to describe something specific are collectively known as:

data.

Analyzing data or evidence is called:

empiricism.

The principle of opportunity cost evolves from the concept of:

scarcity

Positive Economics

Analysis that generates objective descriptions or predictions which can be verified with data.

Normative Economics

Analysis that recommends what an individual or society ought to do .

The opportunity cost of lying in the sun to get a tan is:

Answer: All of these are the opportunity cost. the next best activity you could do instead of lying in the sun. the potential skin problems that could result from sunlight exposure. the time you take to lie in the sun.

Who are Economic Agents?

Can be a group: Government Army Firm University Political Party Labor Union Sports Team Street Gang

Macroeconomics

The study of the economy as a whole. Macroeconomics study economy wide Phenomena, like the growth rate of a country's total economic output, the inflation rate, or the unemployment rate.

Scarce Resources

Things that people want, where the quantity that people want exceeds the quantity that is available.

The optimal economic decision is to continue any activity, investing or otherwise, up to the point where:

the additional benefit of the activity is at least more than the additional cost of the activity

A definition of opportunity cost is:

the value of best thing that you give up to get something else.

An example of subjective judgement would be

what level of saving a person will make for future expenditures. the value of a rock from the moon. how much risk one is willing to accept to receive a gain.