ECU Microeconomics Test 1 Chapters 1-4 Study Guide | Economics Review, Concepts &
Practice Questions
economics - correct answer ✔✔study of how individuals make decisions given scarce resources
microeconomics - correct answer ✔✔branch of economics that focuses on actions of particular
agents within the economy, like households, workers, and business firms. Also, decisions of
individuals maximizing happiness or firms maximizing profits.
macroeconomics - correct answer ✔✔aggregates all individuals and all firms in a country
equity - correct answer ✔✔fair distribution among members of society
more equity has what effect on efficiency and why? - correct answer ✔✔less efficiency because
it reduces the incentive to work
economic principle #1 - correct answer ✔✔people face trade offs
economic principle #2 - correct answer ✔✔the cost of something is what you give up to get it
opportunity cost - correct answer ✔✔whatever must be given up to obtain something
formula for opportunity cost - correct answer ✔✔ratio of cost / gain
do things like food and cost of living have an opportunity cost? - correct answer ✔✔no because
those are things that you have to have to live
economic principle #3 - correct answer ✔✔rational people think at the margin
, rational people do what? - correct answer ✔✔attempt to achieve their objectives
marginal - correct answer ✔✔small incremental adjustments
economic principle #4 - correct answer ✔✔people respond to incentives
incentive - correct answer ✔✔something that induces a person to act
economic principle #5 - correct answer ✔✔trade can make everyone better off
involuntary trade is called what? - correct answer ✔✔robbery
true or false: trade decreases efficiency - correct answer ✔✔false - trade increases efficiency
economic principle #6 - correct answer ✔✔markets are usually a good way to organize
economic activity
market - correct answer ✔✔group of buyers and sellers
market economy - correct answer ✔✔decisions are made from interactions of many households
and firms
prices and quantities are determined by... - correct answer ✔✔the interaction of buyers and
sellers
command economy - correct answer ✔✔government sets prices and owns resources
Practice Questions
economics - correct answer ✔✔study of how individuals make decisions given scarce resources
microeconomics - correct answer ✔✔branch of economics that focuses on actions of particular
agents within the economy, like households, workers, and business firms. Also, decisions of
individuals maximizing happiness or firms maximizing profits.
macroeconomics - correct answer ✔✔aggregates all individuals and all firms in a country
equity - correct answer ✔✔fair distribution among members of society
more equity has what effect on efficiency and why? - correct answer ✔✔less efficiency because
it reduces the incentive to work
economic principle #1 - correct answer ✔✔people face trade offs
economic principle #2 - correct answer ✔✔the cost of something is what you give up to get it
opportunity cost - correct answer ✔✔whatever must be given up to obtain something
formula for opportunity cost - correct answer ✔✔ratio of cost / gain
do things like food and cost of living have an opportunity cost? - correct answer ✔✔no because
those are things that you have to have to live
economic principle #3 - correct answer ✔✔rational people think at the margin
, rational people do what? - correct answer ✔✔attempt to achieve their objectives
marginal - correct answer ✔✔small incremental adjustments
economic principle #4 - correct answer ✔✔people respond to incentives
incentive - correct answer ✔✔something that induces a person to act
economic principle #5 - correct answer ✔✔trade can make everyone better off
involuntary trade is called what? - correct answer ✔✔robbery
true or false: trade decreases efficiency - correct answer ✔✔false - trade increases efficiency
economic principle #6 - correct answer ✔✔markets are usually a good way to organize
economic activity
market - correct answer ✔✔group of buyers and sellers
market economy - correct answer ✔✔decisions are made from interactions of many households
and firms
prices and quantities are determined by... - correct answer ✔✔the interaction of buyers and
sellers
command economy - correct answer ✔✔government sets prices and owns resources
