Thinking like an Economist Flashcards
What is Economics?
The study of choices and their consequences made by individuals, businesses, governments, and societies to cope with scarcity and incentives.
Scarcity
Our inability to get everything we want.
Incentive
A reward that encourages an action or a penalty that discourages one.
Microeconomics
The study of the choices made by individuals and businesses, how they interact in markets, and the influence of governments.
Macroeconomics
The study of the performance of the national and global economy (e.g., unemployment rates, inflation, GDP).
Factors of Production
Land, Labor, Capital, Entrepreneurship.
Human Capital
The knowledge and skills that people acquire through education, training, and experience.
Capital
The tools, instruments, machines, buildings, and other constructions used in production.
Opportunity Cost
The highest-valued alternative that must be given up to get something.
Marginal Benefit
The benefit received when you increase an activity.
Marginal Cost
The opportunity cost incurred when you increase an activity.
Self-Interest vs. Social Interest
Self-interest: Choices that benefit the individual.
Social interest: Choices that benefit society as a whole.
Positive Statements
Statements about what “is,” which can be tested and checked.
Normative Statements
Statements about what “should be,” based on values and cannot be tested.
Market Capitalism
An economic system where individuals own land and capital, and markets are used to allocate resources.
Centrally Planned Socialism
An economic system where the government owns land and capital and controls production.
What is Economics primarily concerned with?
A) The production of money
B) The study of choices and their consequences
C) The study of history
D) The distribution of wealth
Answer: B) The study of choices and their consequences
Scarcity refers to…
A) A lack of money
B) The inability to get everything we want
C) The high prices of goods
D) Government intervention
Answer: B) The inability to get everything we want
Which of the following is a factor of production?
A) Money
B) Stocks and bonds
C) Entrepreneurship
D) Taxes
Answer: C) Entrepreneurship
Microeconomics focuses on…
A) Global trade
B) The choices made by individuals and businesses
C) National economic performance
D) The behavior of governments
Answer: B) The choices made by individuals and businesses
Which of the following is NOT considered a factor of production?
A) Land
B) Labor
C) Financial Capital
D) Entrepreneurship
Answer: C) Financial Capital
Marginal benefit refers to…
A) The cost of producing one more unit
B) The additional benefit received from increasing an activity
C) The loss incurred from a decision
D) None of the above
Answer: B) The additional benefit received from increasing an activity
What is an example of a normative statement?
A) “The unemployment rate is 5%.”
B) “We should increase the minimum wage.”
C) “The inflation rate is 2% this year.”
D) “Our planet is warming due to coal usage.”
Answer: B) “We should increase the minimum wage.”
Market Capitalism is characterized by…
A) Government control of production
B) Private ownership of resources and markets
C) Lack of incentives for individuals
D) Central planning by the government
Answer: B) Private ownership of resources and markets
Which of the following best describes opportunity cost?
A) The financial cost of an item
B) The benefits of the next best alternative
C) The total cost of production
D) The revenue from selling a product
Answer: B) The benefits of the next best alternative
The study of unemployment rates and inflation falls under…
A) Microeconomics
B) Business Studies
C) Macroeconomics
D) Personal Finance
Answer: C) Macroeconomics
