Economics And Economic Reasoning Chapter 1

Front 1

is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society.

Back 1

Economics

Front 2

the goods available are too few to satisfy individuals' desire

Back 2

Scarcity

Front 3

is the additional cost to you over and above the costs you have already incurred

Back 3

Marginal Cost

Front 4

costs that have already been incurred and cannot be recovered

Back 4

Sunk Cost

Front 5

is the additional benefit above what you've already derived

Back 5

Marginal Benefit

Front 6

If the marginal benefits of doing something exceed the marginal cost, do it
If the marginal costs of doing something exceed the marginal benefits, don't do it.

Back 6

Economic Decision Rule

Front 7

is the benefit that you might have gained from choosing the next-best alternative

Back 7

Opportunity Cost

Front 8

the necessary reactions to scarcity

Back 8

Economic Forces

Front 9

is an economic force that is given relatively free rein by society to work through the market

Back 9

Market Force

Front 10

is the price mechanism, the rise and fall of prices that guides our actions in a market

Back 10

Invisible Hand

Front 11

a framework that places the generalized insights of the theory in a more specific contextual setting

Back 11

Economic Model

Front 12

a commonly held economic insight stated as a law or general assumption

Back 12

Economic Principle

Front 13

achieving a goal as cheaply as possible

Back 13

Efficiency

Front 14

a market economy, through the price mechanism, will tend to allocate resources efficiently

Back 14

Invisible Hand Theory

Front 15

is the study of individual choice, and how that choice is influenced by economic forces

Back 15

Microeconomics

Front 16

is the study of the economy as a whole

Back 16

Macroeconomics

Front 17

actions (or inaction) taken by government to influence economic actions

Back 17

Economic Policies

Front 18

the study of what is, and how the economy works

Back 18

Positive Economics

Front 19

the study of what the goals of the economy should be

Back 19

Normative Economics

Front 20

the application of the knowledge learned in positive economics to the achievement of the goals on has determined in normative economics

Back 20

Art of Economics

Front 21

Scarcity exits because economies cannot produce enough to meet the perceived desires of all individuals.

True or False

Back 21

True

Front 22

Macroeconomics is the study of how individual choices are affected by economic forces.

True or False

Back 22

False

Front 23

According to the text, economics is the study of how:

a. governments allocate resources in the face of constraints.
b. government policies can be used to meet individuals' wants and desires.
c. human beings coordinate their wants and desires in the face of constraints.
d. provides equal distribution of well-being among its participants.

Back 23

c.

Front 24

An economic system:

a. can eliminate scarcity.
b. addresses the questions what is produced, how it's produced, and for whom it is produced.
c. provides all the goods people want and desire.
d. provides equal distribution of well-being among its participants.

Back 24

b.

Front 25

To engage in economic reasoning, you must compare:

a. total cost and total benefit.
b. marginal cost, sunk cost, and total benefit.
c. sunk cost and marginal cost.
d. marginal cost and marginal benefit.

Back 25

d.

Front 26

The marginal benefit from consuming another unit of a good:

a. must equal the marginal cost or the unit will not be consumed.
b. must be less than the marginal cost or the unit will not be consumed.
c. equals the increase in total benefits from consuming the unit.
d. equals the total benefit obtained from the consumption of all prior units.

Back 26

c.

Front 27

A synonym for marginal =

Back 27

additional

Front 28

Sunk costs:

a. are essential parts of economic reasoning.
b. are irrelevant to economic reasoning.
c. should be considered, but only when marginal cost is less than marginal benefit.
d. should be considered only when there is no information about marginal cost and marginal benefit.

Back 28

b.

Front 29

Marginal analysis suggests that you will engage in more of an activity if the:

a. total benefit of the activity is less than the total cost.
b. additional benefit from the activity exceeds the additional cost.
c. total benefit from the activity exceeds total cost.
d. additional exceeds the additional benefit.

Back 29

b.

Front 30

Economic reasoning would argue that there is an opportunity cost to:

a. all choices.
b. more choices.
c. only choices that involve money.
d. only choices that do not involve money.

Back 30

a.

Front 31

An economist who is studying the relationship between the money supply, interest rates, and the rate of inflation is engaged in:

a. microeconomic research.
b. macroeconomic research.
c. theoretical research because there is no data on these variables.

Back 31

b.

Front 32

Who would likely argue that you need to study the trees before you can understand the forest?

a. A micro-economist.
b. A macro-economist.
c. A positive economist.
d. A Marshallian economist.

Back 32

a.

Front 33

Economics can be described as the study of how people use ______ resources to satisfy _______ wants.

Back 33

limited; unlimited

Front 34

In economic analysis, people's resources are ___________.

Back 34

limited and their wants are unlimited.

Front 35

In economics, items that are used to produce goods and services are known as ________.

Back 35

resources

Front 36

A friends wants to learn how the unemployment rate is calculated and how inflation is measured. He asks you which economics course to take and you advise him to enroll in __________.

Back 36

macroeconomics

Front 37

A microeconomist would study everything except _________.

Back 37

the effect of change in income taxes on the nation's rate of unemployment.

Front 38

Macroeconomics deals with ________________.

Back 38

aggregates within the economy.

Front 39

Economists assume that people are motivated by ______________.

Back 39

rational self-interest

Front 40

When the text refers to rational self interest, it means:

a. looking out for what's best for you as an individual.
b. the focus on your contribution to society.
c. behavior that helps your employer earn higher profits.
d. behavior that makes your society better off.

Back 40

a.

Front 41

One reason why economist often use models in their analysis is that

a. a model helps us to understand, explain, and predict economics phenomena in the real world.
b. it is relatively easy to perfectly specify a model
c. a model accurately pictures every detail of the real world economy.
d. a model relates to individual thought processes rather than behavior

Back 41

a.

Front 42

In order to study how changing price affects consumer predictions, we must assume all other factors, such as income and the prices of other goods are constant. This assumption is best known as __________.

Back 42

certeris paribus

Front 43

Which of the following is an example of a positive economic statement?

a. If payroll taxes are raised, then Social Security crisis will be resolved.
b. In order to reduce the budget deficit, tax rates should be increased.
c. In order to increase employment, the minimum wage should be decreased.
d. If gas prices fall, consumers should purchase more gas.

Back 43

d.

Front 44

Which of the following statements is a normative as opposed to a positive economic statement?

a. Labor unions should be allowed to organize in every industry.
b. Government intervention in markets is common in many countries.
C. Consumer spending generates more jobs.
d. If the price of gasoline goes up, people buy less.

Back 44

a.

Front 45

Scarcity implies that people must ___________.

Back 45

make choices

Front 46

Which of the following are considered factors of production?
I. Land
II. Labor
III. Physical capital
IV. Entrepreneurship

a. I and III only
b. I, II, and III only
c.I and II only
d. I, II, III and IV

Back 46

d.