Chapters 1 and 2

Question 1

Economists study

Answer 1

all human behavior

Question 2

economic agent

Answer 2

individual or group that makes choices

Question 3

scarce resources

Answer 3

things that people want, where the quantity supplied is lees than the quantity demanded

Question 4

Economics

Answer 4

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

Question 5

Positive economics

Answer 5

analysis that generates objective descriptions or predictions about the world that can be verified with data.

Question 6

Normative economics

Answer 6

An analysis that prescribes what an individual or society should do.

Question 7

Normative economics always almost depends on what kind of judgments?

Answer 7

Subjective

Question 8

Macroeconomics

Answer 8

the study of the economy as a whole

Question 9

Microeconomics

Answer 9

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

Question 10

Three principles of economics

Answer 10

Optimization, equilibrium, empiricism

Question 11

Optimization

Answer 11

Trying to choose the best feasible option, given the available information, is optimization.

Question 12

Equilibrium

Answer 12

special situation in which everyone is simultaneously optimizing, so nobody believes he/she would benefit personally by changing his/her behavior.

Question 13

empiricism

Answer 13

analysis that uses data

Question 14

Trade-offs

Answer 14

an agent must give up one thing to obtain the other.

Question 15

Budget constraint

Answer 15

Set of things a person can choose to do without breaking his/her budget

Question 16

Opportunity cost

Answer 16

best alternative use of a resource

Question 17

Cost-benefit analysis

Answer 17

an analysis that adds up costs and benefits using a common unit of measurement, like dollars

Question 18

cost-benefit analysis and what are the same thing?

Answer 18

optimization

Question 19

free-rider problem

Answer 19

people want others to do the dirty work

Question 20

Scientific method

Answer 20

ongoing process that economists use to develop models for the world and to test those models with data.

Question 21

Model

Answer 21

simplified description or representation of the world.

Question 22

Another name for model

Answer 22

theory

Question 23

hypotheses

Answer 23

predictions, typically generated by a model, that can be tested with data.

Question 24

variable

Answer 24

factor that is likely to change or vary.

Question 25

Two reason why correlation does not imply causation

Answer 25

1. Omitted variables

2. Reverse causality

Question 26

Omitted variable

Answer 26

Variable that was left out of a study, that, if included, could explain why two variables in a study are correlated.

Question 27

Reverse causality

Answer 27

mix up the direction of cause and effect

Question 28

experiment

Answer 28

controlled method of investigating causal relationships among variables

Question 29

Natural experiment

Answer 29

Some process, outside of the control of the experimenter, has assigned subjects to control and treatment groups in a random or nearly random way

Question 30

Two properties of good economic questions

Answer 30

1. Good economic questions address topics that are important to economic agents and/or to society
2. Good economic questions can be answered

Question 31

Independent variable

Answer 31

variable that the experiment is choosing, not dependent on any other variable

Question 32

Time series graph

Answer 32

displays data at different points in time