Micro Book 1

Question 1

Economics is defined as

Answer 1

the allocation of scarces resources

Question 2

Why is it difficult to conduct experiments

Answer 2

It isn’t practical or ethical to carry out
Economists can’t have control variables

Question 3

What does ceteris paribus do?

Answer 3

Assume that “all other things being equal”

Question 4

What is utility?

Answer 4

The benefit gained from something

Question 5

Why might someone not maximise their utility?

Answer 5

Habits
Mental Health
Long-run vs Short-run
Viewpoints
Lack of information
Other people

Question 6

Are positive statements based on opinions

Answer 6

No

Question 7

Can Positive statements be tested

Answer 7

Yes

Question 8

Normative statements are based on?

Answer 8

Effectively based on opinions

Question 9

What is the basic economic problem

Answer 9

There are infinite human wants and limited resources with competing uses

Question 10

What is a Land resource

Answer 10

Any natural resource

Question 11

What is Labour in production

Answer 11

Any physical or mental effort from workers

Question 12

What is Capital in production

Answer 12

A man made aid to production

Question 13

What is Enterprise in production

Answer 13

Someone taking a risk to join together all the factors of production

Question 14

What is Trade off

Answer 14

Any situation where you can only make more of one thing by having less of another

Question 15

What is an opportunity cost

Answer 15

The benefit forgone from the next best alternative

Question 16

What does a PPF illustrate

Answer 16

The production capacity of the economy

Question 17

How to find out productivity

Answer 17

Productivity = (Total output per time period)/ (Number of unit of factor of production)

Question 18

When is technical efficiency achieved

Answer 18

The maximum possible amount of output is being produced for the given level of input

Question 19

What is allocative efficiency and how is it achieved

Answer 19

The economy is producing the combination of output that maximise consumer welfare
Price = Marginal Cost

Question 20

What is the concept of Pareto efficiency

Answer 20

A situation where nobody can be made any better off without someone being made better off

Question 21

Why could a PPF’s lines be straight

Answer 21

It means that the opportunity cost of producing two goods are constant

Question 22

How do you show if an opportunity cost on one axis is greater or lower

Answer 22

The flatter the curve, the greater the cost on the vertical axis. The steeper the curve the greater cost on the horizonal axis

Question 23

What are the advantages of higher productivity

Answer 23

Lower average costs
Improved competitiveness in international markets
Higher real wages
Economic growth

Question 24

How can X-inefficiency occur

Answer 24

Dominant firms lack the incentive to minimise their costs because they have the ability to increase prices

Question 25

What is the division of Labour

Answer 25

Production is divided into a number of different stages and workers are only working on one of the tasks

Question 26

What is specialisation

Answer 26

People focus on things that they do best