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Microeconomics Bimillah

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Why Study Economics? To Learn a Way of Thinking To Understand Society To Understand Global Affairs To Be an Informed Voter

Three fundamental concepts: Opportunity cost Marginalism, and Efficient markets

economics The study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided (the scope And Method Of Economics) What is economics? a. Economics is the study of money and financial systems. b. Economics is the study of business. c. Economics is a behavioral science that studies how people make choices. d. Economics is a natural science that studies the resources that nature and previous generations have provided.

opportunity cost The best alternative that we forgo, or give up, when we make a choice or a decision.

What is opportunity cost? a. Opportunity cost refers to costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred. b. Opportunity cost is the value of what we give up by not making the alternative choice. c. Opportunity cost is a business concept that explains why it is important to consider the additional cost of production, not just the initial cost, in making production decisions. d. Opportunity cost is a cost associated with the allocation of abundant resources among alternative uses. e. Opportunity cost is a monetary measure of cost that takes into account only explicit costs, or costs that can be counted.

sunk costs Costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred. marginalism The process of analyzing the additional or incremental costs or benefits arising from a choice or decision. efficient market A market in which profit opportunities are eliminated almost instantaneously. Industrial Revolution The period in England during the late eighteenth and early nineteenth centuries in which new manufacturing technologies and improved transportation gave rise to the modern factory system and a massive movement of the population from the countryside to the cities.

Microeconomics looks at the individual unitthe household, the firm, the industry. It sees and examines the trees. Macroeconomics looks at the whole, the aggregate. It sees and analyzes the forest. Which of the following statements is correct? a. The aggregate price level is a subject of concern in microeconomics. b. A study of employment in the semiconductor industry would be categorized as a microeconomic study. c. The production and growth of output in the domestic economy is a microeconomic concern. d. Microeconomics is an in-depth study of aggregate economic behavior. e. Microeconomics includes the study of fiscal and monetary policies, or government policies designed to steer the economy in the right direction.

positive economics An approach to economics that seeks to understand behavior and the operation of systems without making judgments. It describes what exists and how it works. normative economics An approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe courses of action. Also called policy economics. descriptive economics The compilation of data that describe phenomena and facts. economic theory A statement or set of related statements about cause and effect, action and reaction.

model A formal statement of a theory, usually a mathematical statement of a presumed relationship between two or more variables. variable A measure that can change from time to time or from observation to observation. If you apply your own values to judge economic decisions, which category of economics would you be applying? a. Normative economics. b. Positive economics. c. Descriptive economics. d. Economic theory. e. Empirical economics.

Which of the following criteria for judging economic outcomes refers to producing what people want at the least possible cost? a. Efficiency. b. Equity. c. Growth. d. Stability. e. All of the above. ceteris paribus descriptive economics economic growth

economic theory
economics efficiency efficient market empirical economics Equity fallacy of composition Industrial Revolution Macroeconomics marginalism microeconomics model normative economics Ockhams razor opportunity cost positive economics post hoc, ergo propter hoc scarce stability

sunk costs

The Economic Problem: Scarcity And Choice

capital Things that are produced and then used in the production of other goods and services.

factors of production (or factors) The inputs into the process of production. Another term for resources.

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a. b.

What is the difference between a single-person economy and a more complex economy? Most decisions that characterize a complex economy dont have to be made by an economy with a single person. Most resources that are scarce in a complex economy are usually abundant in a simple economy. c. In a single-person economy, the concept of opportunity cost does not apply. d. In a single-person economy, the mechanics of decision making are simpler than those of a more complex economy. e. All of the above. Using a day at the beach as an example, what is the opportunity cost of leisure? a. Leisure is free. For example, you dont have to pay for the benefit of enjoying the sun or relaxing at the beach. b. Leisure has an opportunity cost only if there is a cost associated with it. For example, entering the beach may require you to pay a fee. c. The opportunity cost of leisure at the beach is the value of the things that you could have produced during the time you were at the beach. For example, you could have used the time to work and earn some money. d. According to economists, leisure activities are the only activities that do not carry an opportunity cost.

Refer to the figure. A 10-ton increase in the production of farm goods requires a sacrifice of manufactured goods that is: a. greater between points b and c than between points e and f. b. greater between points e and f than between points b and c. c. proportionally the same between any two points. d. less and less as you move downward along the curve. A market exists primarily in what type of economic system? a. A command economy. b. A laissez-faire economy. c. A democracy. d. A dictatorship. e. An economy in transition.

In the input, or factor markets, which side of the market do firms and households occupy? a. Firms are on the supply side and households on the demand side. b. Firms are on the demand side and households on the supply side. c. Both firms and households are on the demand side. d. Both firms and households are on the supply side. e. Neither firms nor households are part of the demand side or the supply side. Input and output markets are connected through the behavior of both firms and households. Firms determine the quantities and character of outputs produced and the types and quantities of inputs demanded. Households determine the types and quantities of products demanded and the quantities and types of inputs supplied.

Which of the following is supplied by households in factor markets? a. Labor. b. Savings. c. Land. d. All of the above. e. None of the above.