Economics 101 (correct answers)
Economics correct answers the study of how people make choices under conditions of
scarcity and of the results of those choices for society
Rational person correct answers someone with well-defined goals who tries to fulfill
those goals as best as he or she can
Economic surplus correct answers the benefit of taking any action minus its cost
Opportunity cost correct answers the value of the next-best alternative that must be
foregone in order to undertake the activity
positive economics correct answers economic analysis that offers cause-and-effect
explanations of economic relationships; the propositions, or hypotheses, that emrege
from positive economics can, in principle, be confirmed or refuted by data; in principle,
data can also be used to measure the magnitude of effects predicted by positive
economics
Normative economics correct answers economic statements that reflect subjective
value judgments and are based on ethical positions
The Scarcity Problem correct answers Having to make a choice- more of one good
thing means having less of another
The Cost-Benefit Principle correct answers An individual will be better off taking an
action if, and only if, the extra benefits from taking the action are greater than the extra
costs
Time value of money correct answers the fact that a given dollar amount today is
equivalnet to a larger dollar amount in the future, because the money can be invested in
an interest-bearing account in the meantime
Sunk cost correct answers a cost that is beyond recovery at the moment a decision
must be made
Marginal cost correct answers the increase in total cost that results from carrying out
one additional unit of an activity
marginal benefit correct answers the increase in total benefit that results from carrying
out one more unit of an activity
average cost correct answers total cost of undertaking n units of an activity divided by n
, average benefit correct answers total benefit of undertaking n units of an activity divided
by n
fixed cost correct answers a cost that does not very with the level of an activity
variable cost correct answers a cost that varies with the level of activity
microeconomics correct answers the study of individual choice under scarcity and its
implications for the behaviour of prices and quantities in individual markets
macroeconomics correct answers the study of the performance of national economies
and the policies that governments use to try to improve that performance
absolute advantage correct answers one person has an absolute advantage over
another if he or she takes fewer hours to perfom a task than the other person
comparative advantage correct answers one person has a comparative advantage over
another if his or her opportunity cost of performing a task is lower than the other
person's opportunity cost
The Principle of Comparative Advantage correct answers total output is largest when
each person concentrates on the activities for which his or her opportunity cost is lowest
production possibilities curve correct answers a graph that describes the maximum
amount of one good that can be produced for every possible level of production of the
other good
excess supply correct answers the difference between the quantity supplied and the
quantity demanded when the price of a good exceeds the equilibrium price
excess demand correct answers he difference between the quantity supplied and the
quantity demanded when the price of a good lies below the equilibrium price
efficient quantity correct answers quantity that results in the maximum possible
economic surplus from producing and consuming the good
economic efficiency correct answers condition that occurs when all goods and services
are produced and consumed at their respective socially optimal levels
The Efficiency Principle correct answers economic efficiency occurs when total
economic surplus is maximized
The Equilibrium Principle correct answers a market in equilibrium leaves no unexploited
opportunities for individuals but may not exploit all gains achievable through collective
action
Economics correct answers the study of how people make choices under conditions of
scarcity and of the results of those choices for society
Rational person correct answers someone with well-defined goals who tries to fulfill
those goals as best as he or she can
Economic surplus correct answers the benefit of taking any action minus its cost
Opportunity cost correct answers the value of the next-best alternative that must be
foregone in order to undertake the activity
positive economics correct answers economic analysis that offers cause-and-effect
explanations of economic relationships; the propositions, or hypotheses, that emrege
from positive economics can, in principle, be confirmed or refuted by data; in principle,
data can also be used to measure the magnitude of effects predicted by positive
economics
Normative economics correct answers economic statements that reflect subjective
value judgments and are based on ethical positions
The Scarcity Problem correct answers Having to make a choice- more of one good
thing means having less of another
The Cost-Benefit Principle correct answers An individual will be better off taking an
action if, and only if, the extra benefits from taking the action are greater than the extra
costs
Time value of money correct answers the fact that a given dollar amount today is
equivalnet to a larger dollar amount in the future, because the money can be invested in
an interest-bearing account in the meantime
Sunk cost correct answers a cost that is beyond recovery at the moment a decision
must be made
Marginal cost correct answers the increase in total cost that results from carrying out
one additional unit of an activity
marginal benefit correct answers the increase in total benefit that results from carrying
out one more unit of an activity
average cost correct answers total cost of undertaking n units of an activity divided by n
, average benefit correct answers total benefit of undertaking n units of an activity divided
by n
fixed cost correct answers a cost that does not very with the level of an activity
variable cost correct answers a cost that varies with the level of activity
microeconomics correct answers the study of individual choice under scarcity and its
implications for the behaviour of prices and quantities in individual markets
macroeconomics correct answers the study of the performance of national economies
and the policies that governments use to try to improve that performance
absolute advantage correct answers one person has an absolute advantage over
another if he or she takes fewer hours to perfom a task than the other person
comparative advantage correct answers one person has a comparative advantage over
another if his or her opportunity cost of performing a task is lower than the other
person's opportunity cost
The Principle of Comparative Advantage correct answers total output is largest when
each person concentrates on the activities for which his or her opportunity cost is lowest
production possibilities curve correct answers a graph that describes the maximum
amount of one good that can be produced for every possible level of production of the
other good
excess supply correct answers the difference between the quantity supplied and the
quantity demanded when the price of a good exceeds the equilibrium price
excess demand correct answers he difference between the quantity supplied and the
quantity demanded when the price of a good lies below the equilibrium price
efficient quantity correct answers quantity that results in the maximum possible
economic surplus from producing and consuming the good
economic efficiency correct answers condition that occurs when all goods and services
are produced and consumed at their respective socially optimal levels
The Efficiency Principle correct answers economic efficiency occurs when total
economic surplus is maximized
The Equilibrium Principle correct answers a market in equilibrium leaves no unexploited
opportunities for individuals but may not exploit all gains achievable through collective
action
