Ch 1-3

Question 1

The study of how society manages its scarce resources

Answer 1

Economics

Question 2

When society gets the most from its scarce resources

Answer 2

Efficiency

Question 3

When prosperity is distributed uniformly among society’s members

Answer 3

Equality

Question 4

Whatever given up to attain something

Answer 4

Opportunity cost

Question 5

People who systematically and purposefully do the best they can to achieve their objectives

Answer 5

Rational people

Question 6

Incremental adjustments to an existing plan

Answer 6

Marginal changes

Question 7

Something that induces a person to act ie the prospect of reward or punishment

Answer 7

Incentive

Question 8

A group of buyers and sellers not necessarily in the same location

Answer 8

Market

Question 9

Allocates resources through the decentralized decisions of many households and firms as they interact in markets

Answer 9

Market economy

Question 10

Invisible hand

Answer 10

Price

Question 11

When the market fails to allocate society’s resources efficiently

Answer 11

Market failure

Question 12

When the production or consumption of a good affects bystanders ie pollution

Answer 12

Externalities

Question 13

A single buyer or seller has substantial influence on market price ie monopoly

Answer 13

Market power

Question 14

The most important determinant of living standards, the amount of goods and services produced per unit of labor

Answer 14

Productivity

Question 15

Increase in the general level of prices

Answer 15

Inflation

Question 16

The resources the economy uses to produce goods and services including labor land and capital

Answer 16

Factors of production

Question 17

The study of how households and firms make decisions and how they interact in markets

Answer 17

Microeconomics

Question 18

Study of the economy-wide phenomenons including inflation, unemployment, and economic growth

Answer 18

Macroeconomics

Question 19

Attempt to describe the world as it is, can be refuted or confirmed

Answer 19

Positive statement

Question 20

Attempt to prescribe how the world should be, can’t be refuted or confirmed

Answer 20

Normative statement

Question 21

Trade can make everyone better off

Answer 21

Interdependence

Question 22

Goods produced domestically and sold abroad

Answer 22

Exports

Question 23

Goods produced abroad and sold domestically

Answer 23

Imports

Question 24

The ability to produce a good using fewer inputs than another producer

Answer 24

Absolute advantage

Question 25

The ability to produce a good at a lower opportunity cost than another producer

Answer 25

Comparative advantage

Question 26

The limited nature of society’s resources

Answer 26

Scarcity