Micro Key Words

Question 1

Allocative efficiency

Answer 1

an efficient market whereby all goods and services meet the needs and wants of society

Question 2

Capital

Answer 2

the physical or financial resources used to produce value in an economy

Question 3

Ceteris Paribus

Answer 3

All other things remain equal

Question 4

Finite Resouces

Answer 4

Non-renewable resources

Question 5

Imperfect information

Answer 5

occurs when the economic agents lack information about a good or any other information relevant to the transaction

Question 6

Opportunity Cost

Answer 6

money or benefits lost by not selecting a particular option during the decision-making process

Question 7

Rationing Price Function

Answer 7

When the supply of a good is limited, its price increases, which can help to reduce demand and allocate the available quantity to those who are willing and able to pay the higher price.

Question 8

Normative Statement

Answer 8

Statements that make a value judgement

Question 9

Positive Statement

Answer 9

Statements that describe or explain a phenomenon or relationship in the world

Question 10

Bounded Rationality

Answer 10

the way that humans make decisions that depart from perfect economic rationality since we are limited by our mental capacity, the information available to us, and time

Question 11

Heuristics

Answer 11

mental shortcuts that allow people to solve problems and make judgments quickly and efficiently

Question 12

Utility

Answer 12

A term used to determine the worth or value of a good or service

Question 13

Derived Demand

Answer 13

The demand for a good or service that results from the demand for a different, or related, good or service

Question 14

Normal Good

Answer 14

Goods whose demand increases with an increase in income

Question 15

Productive Efficiency

Answer 15

That ability of a firm to produce goods or services at the lowest possible cost, given the level of output and the available technology

Question 16

Technical Economy Of Scale

Answer 16

A type of internal economy of scale, achieved via technology

Question 17

Normal Profit

Answer 17

A profit metric that takes into consideration both explicit and implicit costs

Question 18

Sunk Cost

Answer 18

An investment already incurred that can’t be recovered

Question 19

Contestability

Answer 19

A company can be challenged or contested by rival companies looking to enter the industry or market

Question 20

Deadweight Loss

Answer 20

The loss of efficiency for society as a whole. Either producers, consumers, or the government will lose

Question 21

Hit and Run

Answer 21

When a firm temporarily enters a market and then leaves when supernormal profits are exhausted

Question 22

Kinked Demand Curve

Answer 22

A demand curve that is not linear but has different degrees of elasticity at different price levels

Question 23

Monopoly

Answer 23

A market structure that consists of a single seller or provider and no close substitutes

Question 24

Natural Monopoly

Answer 24

a type of monopoly in an industry or sector with high barriers to entry and start-up costs that prevent any rivals from competing

Question 25

Price Taker

Answer 25

A market participant that is not able to dictate the prices in a market

Question 26

Satisficing

Answer 26

a decision-making process in which an individual or organization settles for a satisfactory solution rather than striving for the optimal solution

Question 27

Perfect competition

Answer 27

an ideal type of market structure where all producers and consumers have full and symmetric information and no transaction costs

Question 28

Availability Bias

Answer 28

an ideal type of market structure where all producers and consumers have full and symmetric information and no transaction costs

Question 29

Product Differentiation

Answer 29

the characteristic or characteristics that make your product or service stand out to your target audience