Basic econ

Question 1

study of decision-making.

Answer 1

economics

Question 2

we study the economic decision-making of the individual and the
consequences of those decisions. We isolate individual markets and we try to explain how they
function and what will cause their behavior to change.

Answer 2

microeconomics

Question 3

we study the
behavior of an economy as an aggregate, or as a whole.

Answer 3

Macroeconomics

Question 4

Some resources seem to be abundantly available to everyone, so we have trouble seeing them
as ―limited.‖

Answer 4

free goods

Question 5

means that society has limited resources
and therefore cannot produce all the goods and
services people wish to have.

Answer 5

scarcity

Question 6

is the study of how society manages
its scarce resources.

Answer 6

economics

Question 7

To get one thing, we usually have to give up
another thing.

Answer 7

P1 People Face Tradeoffs.

Question 8

means society gets the most that it can
from its scarce resources.

Answer 8

Efficiency

Question 9

means the benefits of those resources are
distributed fairly among the members of society.

Answer 9

Equity

Question 10

Decisions require comparing costs and benefits
of alternatives.

Answer 10

P2 The Cost of Something Is What
You Give Up to Get It.

Question 11

People make decisions by comparing
costs and benefits at the margin.

Answer 11

Principle #3: Rational People Think at the
Margin.

Question 12

are small, incremental
adjustments to an existing plan of action.

Answer 12

Marginal changes

Question 13

People gain from their ability to trade with one
another.

Answer 13

Principle #5: Trade Can Make Everyone
Better Off.

Question 13

Marginal changes in costs or benefits motivate
people to respond.

Answer 13

Principle #4: People Respond to Incentives.

Question 14

is an economy that allocates
resources through the decentralized decisions of
many firms and households as they interact in
markets for goods and services.

Answer 14

market economy

Question 15

Households decide what to buy and who to work
for.

Firms decide who to hire and what to produce.

Answer 15

Principle #6: Markets Are Usually a Good
Way to Organize Economic Activity.

Question 16

When the market fails (breaks down)
government can intervene to promote efficiency
and equity.

Answer 16

Principle #7: Governments Can Sometimes
Improve Market Outcomes.

Question 17

occurs when the market fails to
allocate resources efficiently.

Answer 17

Market failure

Question 18

which is the impact of one person or
firm’s actions on the well-being of a bystander.

Answer 18

externality

Question 19

which is the ability of a single person
or firm to unduly influence market prices.

Answer 19

market power

Question 20

is an increase in the overall level of
prices in the economy.

Answer 20

Inflation

Question 21

Standard of living may be measured in different
ways:

Answer 21

By comparing personal incomes.

By comparing the total market value of a nation’s
production.

Question 22

is the amount of goods and
services produced from each hour of a worker’s
time.

Answer 22

Productivity

Question 22

Almost all variations in living standards are
explained by differences in countries’
productivities.

Answer 22

Principle #8: The Standard of Living Depends
on a Country’s Production.

Question 23

The Phillips Curve illustrates the tradeoff
between inflation and unemployment:

⇩Inflation ⇨ ⇧Unemployment

Answer 23

The Phillips Curve illustrates the tradeoff
between inflation and unemployment:

Question 23

One cause of inflation is the growth in the
quantity of money.

Answer 23

Principle #9: Prices Rise When the
Government Prints Too Much Money.

Question 24

is the ultimate source of living
standards.

Answer 24

Productivity

Question 25

is the ultimate source of
inflation.

Answer 25

Money growth

Question 26

represents all possible combinations in which two given goods or services
can be produced. Typically, the frontier is curved, bowed outward from the origin.

Answer 26

Production Possibilities Frontier (PPF)

Question 27

Production at any point along the PPF is?

Answer 27

attainable and efficient,

Question 27

Production at a point inside the frontier is?

Answer 27

attainable but inefficient,

Question 28

Production at a point beyond the frontier is

Answer 28

impossible to attain.

Question 29

On the PPF, as production approaches a point closer to either axis, the

opportunity cost of a trade-off

Answer 29

Increases

Question 30

is what causes the PPF to curve.

Answer 30

law of increasing
opportunity costs

Question 31

shows what quantity of a particular good or service consumers
are willing and able to buy at each price within a range of prices.

Answer 31

A demand schedule

Question 32

When consumers make more money, they have
more money to spend.

Answer 32

A change in consumer income.

Question 32

If a price
change convinces consumers to buy a substitute, demand decreases. If a price change gets consumers buying more of a complementary good, demand increases.

Answer 32

A change in the price of a substitute or complementary good.

Question 32

as the price per unit increases, consumers will demand less of a good or service.

Answer 32

law of
demand,

Question 33

If the number of demanders changes,
the number of people who can (and will) consumer a given item will also change.

Answer 33

A change in the number of demanders.

Question 33

which automatically
raise their salaries in order to keep up with inflation. That type of pay increase won’t
affect demand. But when consumer income rises faster than inflation, we can observe a
change in demand.

Answer 33

Cost of Living Adjustments,

Question 33

If consumers expect any of the above changes to occur,
they will adjust their purchasing patterns accordingly.

Answer 33

5. A change in expectations.

Question 34

What consumers like and don’t like influences what
they buy. If one good or service becomes more “in style,” demand for it will increase.

Answer 34

A change in consumer tastes.

Question 35

is one that can easily replace another good.

Answer 35

substitute good

Question 36

is one so closely related to another that when the consumption of
either good changes, the other is affected in a similar way.

Answer 36

complementary good

Question 37

shows what quantity of a particular good or service sellers are willing and able to
produce and sell at each price within a range of prices.

Answer 37

supply
schedule

Question 38

as the
price per unit increases, sellers will supply more of a good or service.

Answer 38

law of supply

Question 38

The curve is upward-
sloping

Answer 38

supply curve

Question 39

is the quantity of a good or service that sellers are willing and able to produce and sell
at one given price.

Answer 39

Quantity

supplied

Question 40

At a high given price,
quantity supplied is high; at a low price, quantity supplied is low.

Answer 40

law of supply

Question 41

is an incentive to offer a higher volume of a good or service.

Answer 41

profit

Question 42

Profit has two parts:

Answer 42

factor costs; price