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Microeconomics- Basic Economics Concepts questions and answers Graded A+
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Microeconomics- Basic Economics Concepts Exam
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Microeconomics Basic EconomicsConcepts
The payment one pays for acquiring capital is called _____________. -
answersInterest. Similarly, the payment for land is called rent
Analysis that does not impose the value judgments of one individual on the decision of
others is called _______________ analysis. - answersPositive. Positive analysis is the
use of theories and models to predict the impact of a choice. For example: What will be
the impact of an import quota on foreign cars? What will be the impact of an increase in
the gasoline excise tax?
The study of the economy as a whole is called ________________. As opposed to
microeconomics, it deals with the larger picture. - answersMacroeconomics. For
instance, microeconomics may look at an individual firm, whereas macro-economics
looks at analysis of aggregate issues like Economic growth, Inflation, and
Unemployment.
A theory, or ______________, is a simplification that is used to explain an event. -
answersModel. Generally speaking, economics is a set of practical models applied to
the study of individual and group choice.
______________ are called factors of production or inputs. - answersResources.
Goods used to produce other goods, i.e., land, labor, capital, entrepreneurial ability.
"There should be a higher tax on cigarettes, alcohol and other 'vice' items to discourage
people from buying them." is a _________________ statement. - answersNormative.
Normative analysis is analysis of "what ought to be" For example: Consider the equity
and efficiency trade-off of an increase in the gasoline excise tax versus import
restriction on foreign oil.
, _______________ includes the study of how an individual firm decides the price of its
product. - answersMicroeconomics. The study of the economic behavior of individual
decision-making units such as consumers and business firms.
_______________ means there is not enough of an item to satisfy everyone who wants
it. Note that this technical economic definition of differs greatly from the notion of
scarcity as "unusual rarity" that predominates in most ordinary language. -
answersScarcity. In economics - the shortage that exists when less of something is
available than is wanted at a zero price. Virtually all resources are scarce, meaning that
there are not enough of them to satisfy all the desires of all people.
Rational _______-_________ explains why people give money to charitable
organizations. - answersSelf-interest. Rational self-interest is the term economists use
to describe how people make choices. Basic, Concepts, Economic
Recognize the problem. Develop a model of the problem. Test the hypothesis. These
are three of the five steps in the ____________ __________. - answersScientific
method. A manner of analyzing issues that involves five steps: recognition of the
problem, assumptions, model building, predictions, tests of model. The first and most
important step in the scientific method is to identify what the problem or question is.
If an individual decides to save more, he or she can save more. Therefore, if society as
a whole decides to save more, it will be able to save more. This reasoning is faulty and
as such is an example of the fallacy of _____________. - answersComposition. It is the
mistaken assumption that what applies in the case of one applies to the case of many.
Bernard has noticed that every time he washes his car in the morning, it rains that
afternoon. He now believes he can cause it to rain by washing his car, so he has
decided to sell his services to farmers in drought-stricken areas. This reasoning is
mistaken and as such is an example of the interpretation of association as
_____________. - answersCausation. The mistaken assumption that because two
events seem to occur together, one causes the other.
Out of the following - Land, Automobiles, Capital and Labor--_____________ is not a
category of resources. - answersAutomobiles. Resources are goods used to produce
other goods, i.e., land, labor, capital, entrepreneurial ability. Automobiles are a product.
When an effective price ceiling is imposed on a product, the price is kept below the
equilibrium price, which results in a ___________. - answersShortage. When a price
ceiling is imposed on a product, that means that there is a limit to how much a firm can
charge for the product. This limit is normally lower than the equilibrium price which
would have been naturally set by the laws of supply and demand. When this occurs, the
demand is greater than the supply, and a shortage results:<br /><img
src="pastekyhxfw.jpg" /><br />As you can see in the graph above, the price ceiling is
set at Pc. Pc intersects with the Supply curve at a much lower quantity than the
Demand curve. Also, it is much lower than the equilibrium point.
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