Fundamentals A

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Micro economics
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Terms in this set (73)
Micro economics
the study of how households and firms make decisions and how they interact in markets
Macro economics
The study of the economy as a whole
Resources are
land, labor, capital, and entrepreneurial ability
physical capital
the human-made objects used to create other goods and services (tools, machinery)
human capital
the skills and knowledge gained by a worker through education and experience
land
all natural resources used to produce goods and services (land, forest, oil, ocean)
labor
all physical and mental activity devoted to producing goods and services (human effort)
Capital
everything that is created in order to increase the productivity
Scarcity
You cannot have everything you want without incurring some cost.
opportunity cost
whatever must be given up to obtain some item
law of increasing opportunity coststates that the opportunity cost of a good rises as more of the good is produceddiminishing marginal benefitas you consume more of a good, your willingness to pay for an additional unit declinesscarce resourcesThe amount of resources available is limitedEvery person's and every economy's standard of living relies on the effective use ofresources________ deals with large-scale issues of an economy - such as total output - average price levels (and inflation) - and unemploymentMacroeconomics_______________ is the study of how individuals and societies allocate scarce resources among many competing uses and how this decision-making affects the economy at largeeconomicsAll physical and mental activity devoted to producing goods and services is classified under the resource category called ______LaborThe term "scarcity" describes the fact that people's ______ wants cannot be completely satisfied with ______ resources.unlimited; limitedT or F: Every person's and - ultimately - every economy's standard of living depends on the effective use of resources.TrueSince Chevrolet Camaros represent a small subset of all automobiles in existence, they are relatively more ____________ than automobiles in generalscarce than automobiles in general._______ is a branch of economics that typically deals with how prices are determined in markets and how markets adjust to a variety of different events.microeconomicsBecause resources are ________ they must be allocated between competing uses.limited or scarceEconomics is the study of how individuals and societies allocate ___________ resources among many competing usesscarce or limitedTomatoes represent a small subset of food, so tomatoes are:relatively more scarce than food in general.In economics - resources can also be calledfactors of productionDrinkable water is ______ water in general.Opportunity cost is defined as:the value of the opportunity that you give up when you choose one activity instead of another.At a local town council, people debated a proposal that would change the use of public space for recreational use by demolishing a skating park and building an arboretum. This is known as the problem of:allocating scarce resources.allocating resourcesEach society has rules to regulate access to resourcesClara can spend her afternoon doing one of three things: She can study economics, plant a sapling in her garden, or wash her car. Suppose she values spending time in the garden most; next her time washing the car; and her time studying economics the least. What is the opportunity cost of planting a garden?Washing her carIndividuals and businesses must choose between the different uses for their available resources. This is called ______ resources and is due to the concept of ______.allocating; scarcityself-interestThe idea that people choose to do the things that interest them.Marginal Benefit (MB)The additional benefit associated with one more unit of an activity.Marginal Cost (MC)The additional cost associated with one more unit of an activity.Marginal Decision Makingcomparison of additional benefits of a choice against the additional costs it would bring, without considering related benefits and costs of past choicesOptimizationThe idea that people make choices in order to maximize the overall benefit, or utility, of an action subject to its cost; people will engage in an activity as long as the marginal benefit of an activity is greater than or equal to its marginal cost.Self-interest, marginal decision making, and optimization form the basis for:rational decision making.rational decision makingdescribes choices that are logical and consistent while maximizing valueMoney spent by a firm on machinery that is designed to improve future productivity is called:Physical CapitalThe value of the next-best forgone alternative is theopportunity costWhen you decide - after studying for three hours - that another hour of sleep is more beneficial to you than a fourth hour of studying, you are engaging in:marginal decision making.When a decision maximizes overall benefit, it is called:optimizationMarginal benefit is:the additional benefit associated with one more unit of an activitySpending more money on one thing means that you have less money to spend on something else. This is called ______ cost.opportunityThe marginal cost of an activity can be found by calculating the change in:total costs as the level of the activity increases by one unit.When you decide to turn off the bedroom light on your way to the kitchen so that you can save a little money on your electric bill, you are engaging in:marginal decision making.The marginal benefit of an activity can be found by calculating the change in:total costs as the level of the activity increases by one unit.The additional cost associated with one more unit of an activity is the ________ costmarginalThe more of a good or a service that is consumed in a given period of time, the lower the marginal ____________ that is associated with each additional unitbenefitdecreasing marginal benefitwhen each additional unit of the activity yields less benefit than the previous unitincreasing marginal costwhen each additional unit costs more to produce than the previous oneOptimal level of outputthe level of output at which the marginal benefit of the last unit produced and consumed is equal to the marginal cost of that unitAs the amount of an activity increases, its marginal benefit:decreasesThere is no incentive to either increase or decrease the level of the activity performed when:the marginal benefit equals the marginal cost.Increasing marginal cost describesthe direct relationship between the marginal cost associated with the use of a good or a service and the quantity producedWhen the marginal benefit equals the marginal cost, that stable level is referred to as an ______ leveloptimalYou are wasting resources that would be better spent elsewhere:if you continue producing when marginal benefit is less than marginal cost.An economy should continue producing a good or service so long as:marginal benefit exceeds marginal cost.The more of a good or a service that is consumed in a given period of time, the lower the marginal ______ that is associated with each additional unit.benefitIf you decide to produce at a level where marginal cost exceeds marginal benefit (MC > MB), there is a waste of _______ that could be better used somewhere else.resourcesIf an activity is performed where the marginal benefit is greater than the marginal cost (MB > MC), there is:a net gain to the economy.If you continue producing when marginal benefit is less than marginal cost, you are:wasting resources that would be better spent elsewhere.An economy is better off when it stops producing output at the point where:marginal benefit = marginal cost.an examination of how much of a particular good gets producedsubject of microeconomicsBob, the owner of a local deli in town, needs to purchase something that economists would label as "capital" to help him produce sandwiches. Which of the following is an example of capital? an additional worker ham for the sandwiches a new idea that automates the making of sandwiches a meat slicer to cut ham for sandwichesa meat slicer to cut ham for sandwichesthe ability to see a market need and to organize inputs to meet that need is what type of market resourceentrepreneurial abilityThe tools and machines used to produce a good or service are what type of market resourceCapitalThe opportunity cost of an action is always equal tothe next-best alternative for the resources used to undertake the actionWhich of the following can best be characterized as a subject of macroeconomics?an examination of inflationEconomic reasoning is based on the premise that only noneconomic decisions or actions have a cost associated with them. all decisions or actions have a cost associated with them. only economic decisions or actions have a cost associated with them. all decisions or actions are costless.all decisions or actions have a cost associated with them.Relative ScarcityThe comparison of the scarcity of one good, service, or resource to that of another.allocationThe process of assigning a good, service, or resource to one use instead of another.allocatedto set aside for a particular purpose