| Question | Answer |
| When the federal government crafts environmental policies that make it less expensive for firms to follow green initiatives, | the policies are consistent with economic incentives. |
| Economics | the study of the choices people make to attain their goals, given their scarce resources. |
| Free market exists | when the government places few restrictions on how a good or a service can be produced or sold or on how a factor of production can by employed. |
| Entrepreneur | someone who operates a business, bringing together the factors of production--labor, capital, and natural resources--to produce goods and services. |
| Centrally planned economy | government decides how economic resources will be allocated. |
| Market economy | decisions of households and firms interacting in markets allocate economic resources. |
| Normative analysis | concerned with what out to be |
| Scarcity | One of the basic facts of life is that people must make choices as they try to attain their goals. |
| Mixed economy | an economy in which most economic decisions result from the interaction of buyers and sellers in markets but in which the government plays a significant role in the allocation of resources. |
| Ceteris paribus | all else equal |
| Consumers, firms, and government | Who decides what goods and services will be produced. |
| Production Possibilities Frontier (PPF) | a curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology. |
| Marginal | an extra or additional benefit or cost of a decision. |
| Comparative advantage | basis for trade |
| Firms | suppliers of goods and services |
| Household | consists of all the individuals in a home |
| Market | a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade. |
| Property rights | rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it. |
| Positive analysis | concerned with what is |
| Equity | the fair distribution of economic benefits |
| Microeconomics | The study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices. |
| Opportunity cost | the highest valued alternative that must be given up to engage in an activity. |
| Macroeconomics | The study of the economy as a whole, including topics such as inflation, unemployment, and economic growth. |
