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Arnold Economics 1
Economics by Arnold Chapter 1
| Question | Answer |
|---|---|
| A _____ is anything that gives a person utility or satisfaction. It is something that people want more of. | good |
| A _____ is something that gives people disutility or dissatisfaction. It is something that people want less of. | bad |
| _____ is the satisfaction one receives from a good or service. | Utility |
| _____ is the dissatisfaction one receives from a good or service. | Disutility |
| A ______ is anything used to produce a good or service. | resource |
| A resource is also known as an _____ or a ______. | input or a factor of production |
| Name the four major catagories of resources. | Land (natural resources), labor, capital, entrepreneurship |
| The condition whereby our desire for goods and services exceeds our ability to produce goods and services. | Scarcity |
| Identify three implications of scarcity. | (1) we are forced to make choices, (2) we need a rationing device, and (3) the existence of competition |
| A _____ is a mechanism or means for deciding who gets what. | rationing device |
| What is cost? | The highest valued foregone alternative. |
| What does it mean to say that "there is no such thing as a free lunch?" | It means that actions have costs. |
| True or False: "As the cost of an action increases, you will be more likely to do the action." | False, you will be less likely as the cost increases. |
| Define "marginal benefit" | The additional benefits of an action (the change in total benefits for one more unit of the action) |
| Define "marginal cost" | The additional costs of an action (the change in total costs for one more unit of the action) |
| What does in mean to make "decisions at the margin"? | You continue an action as long as the marginal benefits > marginal costs (you do not do an additional action if the marginal benefits < marginal costs) |
| Economic efficiency occurs when marginal benefits _____ marginal costs. | equals |
| What happens to marginal benefits as the quantity (of the action) increases? | Marginal benefits decrease. |
| What happens to marginal costs as the quantity (of the action) increases? | Marginal costs increase. |
| What does it mean to say "there are no $10 bill on the sidewalk"? | If there is a net benefit from an activity then people will pursue it until it no longer exists. |
| True or False: "If the government increases the minimum wage that must be paid to all workers then the incomes of workers will increase." | False because some workers may not be hired (and their income will fall). |
| True or False: "If automobile seatbelt usage increases then there would be fewer and less severe injuries from automobile accidents." | False because automobile drivers may drive more recklessly or less careful (because they feel safer). |
| Positive Economics | The study of "what is" in economics (causal relationships that can be tested). |
| Normative Economics | The study of "what should be" in economics (value judgements that can not be tested). |
| Microeconomics | The area of economics that studies relativly small units such as the individual or the firm. |
| Macroeconomics | The area of economics that studies relativly large units such as the whole economy or major sectors of the economy. |
Created by:
bscollier
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