Introduction to microeconomics

Question 1

What is Scarcity

Answer 1

A situation that arises because people have unlimited wants in face of limited resources

Question 2

What are economic goods

Answer 2

Goods that are scarce

Question 3

What are free goods

Answer 3

Goods that are not scarce

Question 4

What is poverty

Answer 4

A situation where individuals lack the basic necessities of life

Question 5

What are needs

Answer 5

Things that are essential or human survival

Question 6

What are wants

Answer 6

goods that are not necessary for human survival

Question 7

Why are choices bad

Answer 7

People can make bad decisions

Question 8

What are firms

Answer 8

An organization that creates output

Question 9

What is a household

Answer 9

A person or people that engage in economic activity

Question 10

What is government

Answer 10

The group of MPs that are responsible to develop policy and laws

Question 11

What is rationality

Answer 11

Economic agents acting in their own best interests

Question 12

What is utility

Answer 12

The benefit derived from the consumption of a good or service

Question 13

What is an incentive

Answer 13

Something that motivates someone to do something

Question 14

What is opportunity cost

Answer 14

the cost of the next best alternative

Question 15

When are incentives most effective

Answer 15

When agents are rational and there is lots of information

Question 16

When are incentives ineffective

Answer 16

When agents are irrational
When there is little information
When there is little competition

Question 17

What is a positive statement

Answer 17

A statement that uses facts

Question 18

What is a normative statement

Answer 18

A statement involving a value judgement

Question 19

What is a value judgement

Answer 19

A statement based on opinions or beliefs

Question 20

What is a factor of production

Answer 20

Resources used in the production process e.g. land, labour, capital or enterprise

Question 21

What is the reward for land

Answer 21

Rent

Question 22

What is the reward for labour

Answer 22

Wages/slaries

Question 23

What is the reward for capital

Answer 23

Interest

Question 24

What is the reward for enterprise

Answer 24

Profit

Question 25

What is resource allocation

Answer 25

The way in which a societies productive assets are deployed

Question 26

What is a market economy

Answer 26

Where market forces are allowed to guide resource allocation

Question 27

What is a centrally planned economy

Answer 27

Where the government guides resource allocation within a society

Question 28

What is a mixed economy

Answer 28

Where the government and market work together to allocate resources

Question 29

What is the invisible hand

Answer 29

A term used by Adam Smith to describe how resources are allocated within a market economy

Question 30

What is the GDP of a country

Answer 30

The value of all the final goods and services produced in a country per year

Question 31

How do incentives affect the decisions made by economic agents

Answer 31

By affecting the opportunity cost

Question 32

What is a trade-off

Answer 32

A situation in which the choice of one alternative requires the sacrifice of another

Question 33

What does a PPC (Production Possibility Curve) show

Answer 33

The maximum combination of goods or services that can be produced in a set period of time given available resources

Question 34

What are capital goods

Answer 34

Goods used as part of the production process

Question 35

What are consumer goods

Answer 35

Goods produced for consumption

Question 36

What is the basic economic problem

Answer 36

How best to allocate scarce resources

Question 37

What is a shift on a curve

Answer 37

When the curve changes position

Question 38

What is movement along a curve

Answer 38

When a point changes position to a different point on the same curve

Question 39

What is consumer surplus

Answer 39

The difference between the amount a consumer pays for an item and the amount they are willing to pay for the item