chapter 1

Question 1

Economics . (Mankiw and Taylor)

Answer 1

is the study of how society manages its scarce resources

Question 2

Economics (Acemoglu, Laibson and List)

Answer 2

is the study of how agents choose to allocate scarce resources and how those choices affect society.

Question 3

Economics (Colander)

Answer 3

is the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society.

Question 4

Economics (Robbins)

Answer 4

is the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.

Question 5

Economics (Krugman and Wells)

Answer 5

is the social science that studies the production, distribution, and consumption of goods and services.

Question 6

(The economic problem)

Economics

Answer 6

strives to understand how economic agents make decisions and seek to satisfy needs and wants within a context of scarcity of resources.

Question 7

The economic activity

Answer 7

is how much buying and selling goes on in the economy over a period of time.

Question 8

economy

Answer 8

is all the production and exchange activities that take place in a particular geographic region (for example: the Belgian economy).

Question 9

Fundamental problem in economics is

Answer 9

= scarcity of resources (land, labor and capital)

Question 10

A resource

Answer 10

is anything that can be used to produce something else:

Question 11

An economic system

Answer 11

is the way in which resources are organized and allocated to provide for the needs of an economy’s citizens

Question 12

The economic problem highlights three questions that any society must answer

Answer 12

• What goods and services should be produced?
• How should these goods and services be produced?
• Who will get what will be produced?

Question 13

GDP per capita0

Answer 13

Gross Domestic Product, is a measure to compare living standards in each country. is the total value of everything produced in a given period such as a year.

Question 14

A traditional market

Answer 14

is a place where buyers and sellers of products and services meet.

Question 15

Market as an abstract concept:

Answer 15

supply and demand of a certain good or

service.

Question 16

A market is an institution

Answer 16

that allows for the exchange of scarce goods according to certain rules.

Question 17

invisible hand of the market

Answer 17

guides this self-interest into promoting general economic well-being

Question 18

market failure arises when

Answer 18

the market fails to allocate society’s resources efficiently or when the individual pursuit of self-interest leads to bad results for the society as a whole.
(the individual pursuit of self-interest makessociety worse off)

Question 19

(The true cost of something is its opportunity cost.)

The opportunity cost of a choice:

Answer 19

• what you must give up in order to get it.
• what you forgo by not choosing your next best alternative.
• includes all the costs, whether or not they are monetary costs, of making that choice.
• can differ between individuals

Question 20

marginal changes3

Answer 20

• incremental/ gradual changes to an existing plan.

Question 21

An incentive

Answer 21

is anything that offers rewards to people to change their behavior.

Question 22

In a market economy, individuals engage in trade.

Answer 22

They provide goods and services to others and receive goods and services in return.

Question 23

gains from trade:

Answer 23

people can get more of what they want through trade than they could if they tried to be self-sufficient.

Question 24

(An increase in output is due to) specialization:

Answer 24

each person specializes in the taks that they are good at performing

Question 25

An economic situation is in equilibrium when

Answer 25

no individual would be better off doing something different.

Question 26

An economy is efficient if | to achieve society's goals

Answer 26

it takes all opportunities to make some people better off without making other people worse off.

Question 27

Equity means

Answer 27

that everyone gets his or her fair share.

Question 28

Microeconomics is

Answer 28

the study of how households, firms, and governments make decisions and how these choices affect prices, the allocation of resources, and the well-being of other agents.

Question 29

Macroeconomics

Answer 29

is the study of economy-wide phenomena, including inflation, unemployment, economic growth, booms and recessions.

Question 30

A model

Answer 30

is a representation of reality which facilitates | understanding of how something works.

Question 31

Economists formulate hypotheses

Answer 31

assumptions, predictions or suppositions for something

Question 32

Positive analysis

Answer 32

attempts to describe the world as it is.

Question 33

Normative analysis

Answer 33

attempts to prescribe how the world should be. It | recommends what people or the government should do.

Question 34

trade offs

Answer 34

is the loss of benefits from a decision to forego or sacrifice one option, balanced against the benefits incurred from the choice made

Question 35

marginal reasoning

Answer 35

comparing costs and benefits of doing a little bit more of an activity versus doing a little bit less.

Question 36

econometrics

Answer 36

Hypotheses can be tested using data and statistical models to identify causal effects