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Microeconomics Ch 1( Economic Issues and Concepts) Exam with solved questions
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Microeconomics Ch 1( Economic Issues and Concepts) Exam
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Microeconomics Ch 1 Economic Issuesand Concepts)
What is economics - answersEconomics is the social science of the allocation of scarce
resources to satisfy unlimited human wants.
What are economical resources? and what are they called? - answersEconomists call
resources factors of production. Factors of production include Land(natural
endowments), Labour (mental and physical human effort), and Capital (tools,
machinery, equipement)
Why factors of production important? - answersFactors of production are used to
produce goods and services
Goods are _____ - answerstangible (ex: cars, steel)
Services are _____ - answersintangible (ex: legal advice)
Production is the _______ - answersact of making them
Consumption is the ______ - answersact of using them
How does scarcity and choice relate? - answersSince, existing resources are scarce
and there are enough resources to produce only a fraction of the goods and services
that we want. Therefore, scarcity implies the need of choice.
, What is opportunity cost - answersis the value of the next best alternative that is forgone
when one alternative is chosen
What does the PPB signify? - answersThe PBB illustrates Scarcity, Choice, and
Opportunity Cost
What do points outside of the PPB curve represent? - answersPoints outside of the PPB
curve represent unattainability due to limited resources
What do points inside of the PPB curve represent? - answersPoints inside of the PPB
curve represent innefficiency due to maximum production not being achieved
What is resource allocation? - answersResource allocation determines the quatities of
various goods that are produced
What are the 4 key economic problems? - answersWhat is produced and how?, What is
consumed and by whom?, Why are resources sometimes idle?, Is productive capacity
growing?
What happens to the PPB curve when there is economic growth? - answersThe
economic growth shifts the boundaty outward makes it possible to produce more of all
products
What is microeconomics? - answersMicroeconomics is the study of the causes and
consequences of the allocation of resources as it is affected by the workings of the price
system
What is macroeconomics? - answersMacroeconomics is the study of the determination
of economic aggregates such as total output, employment, and growth
Which of the 4 key economic problems fall within the realm of microeconomic? -
answersQuestions 1 and 2 - What is produced and how? , What is consumed and by
whom?
Which of the 4 key economic problems fall within the realm of macroeconomics? -
answersQuestions 3 and 4 - Why are resources sometimes idle? , Is productive
capacity growing?
What do government policies do? - answersGovernment policies affect the outcome of
all 4 key economic problems
How do government policies affect the outcome of all 4 key economic problems? -
answersGovernment policies can correct market failure resulting from misallocation
resources (Q1), address fairness of distribution of consumption across individuals (Q2),
Provide solutions to reduce idleness of nation's resource (Q3), promote economic
growth (Q4)
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