Chapter 1 (10 principles of economics)

Question 1

10 Principles of Economics

Answer 1

1)People Face Tradeoffs
2 The cost of something is what you give to get it
3)Rational people think at the margin
4) People respond to incentives
5)Trade can make everyone better off
6)Markets are usually a good way to organize economic activity
7)Governments can sometimes improve market outcomes
8)A country’s standard of living depends on it ability to produce goods and services
9)Prices Rise when to government prints too much money
10)Society faces a short-run trade-off between inflation and unemployment

Question 2

opportunity cost

Answer 2

the value of the next best alternative that must be given up in order to obtain something

Question 3

scaricity

Answer 3

society has limited resources and therefore can’t produce all the goods and services people wish to have

Question 4

economics

Answer 4

the study of how society manages its scares resources

Question 5

efficiencey

Answer 5

the property of society getting the most it can from its resources

Question 6

equality

Answer 6

property of distributing economic prosperity uniformly among the members of society

Question 7

rational people

Answer 7

people who systematically and purposefully do the best to achieve their objectives

Question 8

marginal change

Answer 8

describes a small incremental adjustment to a plan of action (adjustments around the edge of what you are doing

Question 9

incentive

Answer 9

something that induces a person to act, such as a punishment or reward

Question 10

market economy

Answer 10

the decisions of a central planner are replaced by decisions of millions of firms and households

Question 11

property rights

Answer 11

the ability of an individual to own and exercise control over scarce resources (resturants must kno ppl will pay b4 provid. food)

Question 12

market failure

Answer 12

a situation in which a market left on its own, fails to allocate resources efficiently

Question 13

what are the two possible causes of market failure

Answer 13

1) externalities

2) market power

Question 14

externality

Answer 14

the impact of one person s actions on the well being of a bystander (ex: pollution)

Question 15

market power

Answer 15

the ability of a single person (or small group) to have a substantial influence on market prices (ex:if 1 well in a town, owner doesn’t have to compete)

Question 16

standard of living

Answer 16

a level of material comfort as measured by the goods, services, and luxuries available to an individual, group, or nation

Question 17

productivity

Answer 17

the quantity of goods and services produced by one hour of a workers time

Question 18

inflation

Answer 18

increase in the overall level of prices in the economy due to an excess amount of printed money