Microeconomics Chapter 1 Review (The Principles and Practice of Economics)

Everything has an __________ implication!

There really is NOTHING for ____________! You are always giving up something.

Economists study _________________.

How you manage your scarce resources; the study of the use of scarce resources especially when these scarce resources have alternative uses.

Is an individual or a group that makes choices. Ex: a student, a parent, a citizen, a worker, a business leader, a senator. Can also be a group such as an army, political party, university, etc.

What does it mean if something is "scarce"?

Are things people want, where the quantity that people want (if the resources were being given away for free) exceeds the quantity that is available. Can be luxury and everyday goods.

Exists because people have unlimited wants in a world of limited resources.

Describing what has happened or what will happen. An analysis that generates objective descriptions or predictions about the world that can be verified with data; can measure it). Is OBJECTIVE in nature.

Give an example of positive economics.

Advises individuals and society on their choices. An analysis that prescribes what an individual or society ought to do. Is SUBJECTIVE and opinion-based.

Give an example of Normative economics.

The study of the whole economy in aggregate (in sum).

What do we study in macroeconomics?

Is the study of how individuals, households, firms, and governments make choices, and how those choices affect prices, the allocation of resources, and the well-being of other agents. (much more narrow)

What are the 3 Principles of Economics?

Making the best choice possible with given information. Motivated by calculation of benefits and costs.

A situation in which no economic agent would benefit personally by changing his or her own behavior, given the choices of others. Everyone is simultaneously optimizing.

Using data to develop theories, to test theories, to evaluate the success of different governmental policies, and to determine what is causing things to happen in the world. Economists use data to determine whether our theories about human behavior- like optimization and equilibrium- match up with actual human behavior.

Arise when some benefits must be given up in order to gain others. Ex: giving up an hour of working to look at Facebook

Is the set of things that a person can choose to do (or buy) without breaking her budget.

The best alternative use of a resource. What one gives up to consume something else.

Is a calculation that identifies the best option by summing benefits and subtracting costs with both benefits and costs denominated in a common unit of measurement, like dollars. Is used to identify the alternative that has the greatest net benefit.

The sum of the benefits of choosing an alternative minus the sum of the costs of choosing that alternative.

To an economist, _____________ and _____________ are the same thing.

Exists when an individual in a group is able to enjoy the benefits of a situation without incurring the costs.

The definition of economics states that it is the study of how​ _________.

The statement that the United States has too many illegal immigrants is a ____________ statement since it describes what people _______________.

The statement that the United States has a budget deficit that is in excess of $15 trillion is a ______________ statement since it describes what people _____________.

The ethical implications of a hotly debated government policy would best be considered a​ _________.

Economics is divided into two broad fields of​ study: microeconomics and macroeconomics.
Microeconomics studies​ _________, while macroeconomics studies​ _________.

Policy decisions made by the government are analyzed by​ _________.

A policy such as those limiting a firm's monopoly powers would be studied under ______________, since it deals with ______________.

Optimization describes a situation where

Equilibrium describes a situation where

Empiricism describes a situation where

Economics differs from these other social sciences because it also addresses these three key​ concepts:

Suppose your New Year resolution is to get back in shape. You are considering various ways of doing​ this: you can sign up for a gym​ membership, walk to​ work, take the stairs instead of the​ elevator, or watch your diet.
How would you evaluate these options and choose an optimal​ one?

When making your decision about which activity to​ choose, you should consider the monetary cost
as well as
the opportunity cost of the activities. The goal is to choose the option that offers the greatest _________________.

During the process of optimization economists believe that people are considering​ _________.

The goal of optimization for an individual is to maximize

Suppose that you allocate​ $20 each week for your entertainment budget. This money is spent on two​ items: either renting movies for​ $1 each at Redbox or downloading songs from iTunes at​ $1 each.
Given this​ information, which of the following would represent your budget constraint for​ entertainment?

Your budget constraint for entertainment illustrates the concept of _______________, since as you increase your purchases of one​ item, you ____________________.

The opportunity cost of an activity is a measure of
what is given up
when you do that activity.
​
Let's say that you are trying to decide what to do on Friday at 11 a.m. You rank your possible options from the one you value the most to the one that you value the least in the following​ order: going to​ class, sleeping in​ late, going to work​ early, getting​ lunch, going to the gym to​ exercise, and watching television.
If you decide to go to​ class, then what do we know about the opportunity cost of your​ decision?

Comparing a set of feasible alternatives and picking the best one is an optimization process called​ _________.

When deciding whether to install visible countdown timers for pedestrians at​ crosswalks, which of the following would be considered in the​ cost-benefit analysis? ​(Check all that apply.​)

Free riding occurs when ____________ are out of sync with ____________.

Which of the following is subject to the​ free-rider problem?

Which of the following is more susceptible to the​ free-rider problem: fishing in public lakes or public roads​?

In which of the following areas will taking an economics course help benefit you throughout your​ life?