Chapter 1- Intro

Question 1

Scarcity

Answer 1

the limited nature of society’s resources

Question 2

Economics

Answer 2

the study of how society manages its scare resources

Question 3

Efficiency

Answer 3

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

Question 4

Equality

Answer 4

the property of distributing economic prosperity uniformly among the members of society

Question 5

Opportunity Costs

Answer 5

whatever must be given up to obtain some item

Question 6

Rational People

Answer 6

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

Question 7

Marginal Change

Answer 7

a small incremental adjustment to a plan of action

Question 8

Incentive

Answer 8

something that induces a person to act

Question 9

Market Economy

Answer 9

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

Question 10

Property Rights

Answer 10

the ability of an individual to own and exercise control over scarce resources

Question 11

Market Failure

Answer 11

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

Question 12

Externatily

Answer 12

the impact of one person’s actions on the well-being of a bystander

Question 13

Market Power

Answer 13

the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices

Question 14

Productivity

Answer 14

the quantity of goods and services produced from each unit of labor input

Question 15

Inflation

Answer 15

an increase in the overall level of prices in the economy

Question 16

Business Cycle

Answer 16

fluctuations in economic activity, such as employment and production

Question 17

Circular-Flow Diagram

Answer 17

a visual model of the economy that shows how dollars flow through markets among households and firms

Question 18

Production Possibilities Frontier

Answer 18

a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology

Question 19

Opportunity Cost

Answer 19

the cost of something is what you give up to get it

Question 20

Microeconomics

Answer 20

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

Question 21

Macroeconomics

Answer 21

the study of economy wide phenomena, including inflation, unemployment, and economic growth

Question 22

Positive Statements

Answer 22

claims that attempt to describe the world as it is

Question 23

Normative Statements

Answer 23

claims that attempt to prescribe how the world should be