Chapter 1

Question 1

Economics

Answer 1

The discipline that studies how efficient decisions are made

Question 2

Efficient Decisions

Answer 2

Involve choosing the most valuable alternative

Question 3

Theory of Revealed Preference

Answer 3

Our choices reveal our values

Question 4

Characteristics of Value

Answer 4

Value depends on the situation, and value is different for different people, subsequent units of the same good have less value

Question 5

Optimal Arrangement Principle

Answer 5

The idea we choose the best, then the second best, and so on

Question 6

Value of Something to an Individual

Answer 6

The most that an individual is willing to sacrifice to obtain that something

Question 7

Cost

Answer 7

The value of the best alternative which is sacrificed when a decision is made

Question 8

No Free Lunch Principle

Answer 8

Any decision involves cost

Question 9

Macroeconomics

Answer 9

The study of entire economies, using concepts like total output, the unemployment rate, the national debt, total investment

Question 10

Scarcity

Answer 10

We have more wants than our resources can sacrifice

Question 11

Marginal Value

Answer 11

The value of the individual units of that something

Question 12

Marginal Analysis

Answer 12

We consume each unit for which the marginal value is at least as great as marginal cost

Question 13

Law of Diminishing Returns

Answer 13

As we add workers to a production facility, eventually they become less productive because there’s no way for everyone to take part in the production process

Question 14

Demand

Answer 14

The relationship between the possible prices of something and the quantities people are willing to buy, other things equal

Question 15

Supply

Answer 15

The relationship between the possible prices of something and the quantities that people or firms are willing and able to sell, other things equal

Question 16

Equilibrium Price

Answer 16

Consumers can buy all they want and, at the same time, firms can sell all they want.

Question 17

Social Gain

Answer 17

Total Value - Total Cost

Question 18

Consumer’s Gain

Answer 18

Total Value - Total Amount Paid

Question 19

Producer’s Gain

Answer 19

Total Amount Paid - Total Cost

Question 20

Economic Problem

Answer 20

Allocating scarce resources to their best uses

Question 21

Changes in Supply

Answer 21

Shifts in the supply curve

Question 22

Changes in Demand

Answer 22

Shifts in the demand curve