TEST BANK FOR MICROECONOMICS 14TH
EDITION BY ROGER ARNOLD, DANIEL
ARNOLD, DAVID ARNOLD (ALL CHAPTERS,
100% ORIGINAL VERIFIED, A+ GRADE)
Free goods - ANSWER-Goods that are not scarce and therefore available without
limits. Zero opportunity cost e.g. Air
Economic goods - ANSWER-A consumable item that is useful to people but scarce in
relation to its demand
Opportunity cost - ANSWER-The value of the next best alternative foregone
Positive statement - ANSWER-An objective statement that can be tested, amended
or rejected by referring to available evidence
Normative statement - ANSWER-A value judgement that is a subjective statement of
opinion rather than a fact that can be tested
Needs vs Wants - ANSWER-Needs are defined as goods or services that are required
and cannot be done without. Wants are goods or services that are not a necessity
but we desire/wish for
Cost-benefit principle - ANSWER-Every purchase is a trade-off
Rational decision makers - ANSWER-An assumption that economic agents weigh the
marginal benefit that one receives from a good or service against its marginal cost
Economic agents - ANSWER-Decision makers that have effects on the economy of a
country by buying selling, producing, investing, taxing, etc. Government, firms and
households
Government - ANSWER-Elected representative of the consumers that should act on
behalf of the people. The government must decide whether or not to intervene in
the economy or leave it as is.
Firms - ANSWER-An organisation that uses factors of production alongside each
other in order to produce output. They produce goods and services demanded by
consumers
,Households - ANSWER-A group of consumers that buy goods and services. They also
supply their labour to firms to produce goods and services in order to earn the
income needed to purchase g+s
Factors of production - ANSWER-The available resource inputs used in the
production process of g+s (Capital, Enterprise, Land and Labour)
Capital - ANSWER-Man made aids for production; goods used to make other goods
Entrepreneurship - ANSWER-The willingness of an entrepreneur/individual to take
risks and organise production. An entrepreneur is someone who bears the risk of a
business and organises production
Labour - ANSWER-The human resource that is available in the economy; the quantity
and quality of human resources
Land - ANSWER-The natural resources available in the economy; the quantity and
quality of natural resources
Factor payments/rewards - ANSWER-Capital=Interest
Enterprise=Profits
Labour=wages
Land=rent
A model - ANSWER-A simplified representation of reality used to create hypotheses
about economic decisions and events
Production - ANSWER-Any economic activity that leads to a flow of goods and
services for which people are willing and able to pay
Production possibility frontier - ANSWER-A curve showing the maximum quantities
of different combinations of goods and services that can be produced in a set time
period given the available resources and current state of technology
Law of diminishing returns - ANSWER-As a firm adds variable factors of
production(usually labour) to fixed capital, the marginal returns that the firm gains
will gradually begin to decrease
Consumer good - ANSWER-A finished good that is sold for consumption
Capital good - ANSWER-Ant tangible asset that an organisation uses to produce
goods or services such as office buildings, machinery etc.
Specialisation - ANSWER-Where individuals, businesses and whole economies are
not self-sufficient but concentrate on producing certain goods and services, then
trading their surplus.
, Division of labour - ANSWER-The assignment of different parts of a manufacturing
process or task to different specialised people in order to improve efficiency
Productivity - ANSWER-Output of a good or service, per factor of production, per
period of time
Functions of money - ANSWER-A medium of exchange-it should be accepted
universally for the payment of goods, services and debt
Unit of account-It allows the value of goods, services and other assets to be
compared so that the prices of products reflect the value that society places on them
Standard of deferred payment-Money can be used to pay back debt
Store of value-It must be possible to use for future transactions and so it must be
non-diminishable
Resource allocation - ANSWER-The way in which a society's factors of production are
divided amongst their alternative uses
Objectives of households - ANSWER-Households make decisions about how to
allocate expenditure based on the utility they derive from consuming a good or
service
Objectives of firms - ANSWER-Firms make decisions about what to produce and how
much to produce (how to use their factors of production) in order to receive a
return/profit for their endeavours.
Objectives of the government - ANSWER-Government's objectives are to maximise
social welfare and will do this through decision making regarding taxation to fund
public expenditure, enforcement of laws and regulation that provide a system for
the market to work in. May aim to achieve 'macroeconomic performance indicators'
Utility maximisation - ANSWER-The aim of trying to achieve the highest level of
satisfaction possible from the consumption/production of a good
Profit maximisation - ANSWER-The aim of trying to achieve the highest levels of
profit possible
Incentives for households - ANSWER-Their decisions will depend on the benefits
gained form consumption relative to the costs involved. Both including the price and
the opportunity cost of consumption A04: Time delays may mean consumers may
take time to respond to changes in price and firms may take time to respond to
consumer's changes in tastes. Workers may also not seek the highest wage possible
as they may do a job to fulfil a sense of vocation or for the non-pecuniary benefits.
Incentives for firms - ANSWER-Firms decisions will depend on the potential profits
that supplying a product can create. EG. if the price of a product rises, a firm has an
EDITION BY ROGER ARNOLD, DANIEL
ARNOLD, DAVID ARNOLD (ALL CHAPTERS,
100% ORIGINAL VERIFIED, A+ GRADE)
Free goods - ANSWER-Goods that are not scarce and therefore available without
limits. Zero opportunity cost e.g. Air
Economic goods - ANSWER-A consumable item that is useful to people but scarce in
relation to its demand
Opportunity cost - ANSWER-The value of the next best alternative foregone
Positive statement - ANSWER-An objective statement that can be tested, amended
or rejected by referring to available evidence
Normative statement - ANSWER-A value judgement that is a subjective statement of
opinion rather than a fact that can be tested
Needs vs Wants - ANSWER-Needs are defined as goods or services that are required
and cannot be done without. Wants are goods or services that are not a necessity
but we desire/wish for
Cost-benefit principle - ANSWER-Every purchase is a trade-off
Rational decision makers - ANSWER-An assumption that economic agents weigh the
marginal benefit that one receives from a good or service against its marginal cost
Economic agents - ANSWER-Decision makers that have effects on the economy of a
country by buying selling, producing, investing, taxing, etc. Government, firms and
households
Government - ANSWER-Elected representative of the consumers that should act on
behalf of the people. The government must decide whether or not to intervene in
the economy or leave it as is.
Firms - ANSWER-An organisation that uses factors of production alongside each
other in order to produce output. They produce goods and services demanded by
consumers
,Households - ANSWER-A group of consumers that buy goods and services. They also
supply their labour to firms to produce goods and services in order to earn the
income needed to purchase g+s
Factors of production - ANSWER-The available resource inputs used in the
production process of g+s (Capital, Enterprise, Land and Labour)
Capital - ANSWER-Man made aids for production; goods used to make other goods
Entrepreneurship - ANSWER-The willingness of an entrepreneur/individual to take
risks and organise production. An entrepreneur is someone who bears the risk of a
business and organises production
Labour - ANSWER-The human resource that is available in the economy; the quantity
and quality of human resources
Land - ANSWER-The natural resources available in the economy; the quantity and
quality of natural resources
Factor payments/rewards - ANSWER-Capital=Interest
Enterprise=Profits
Labour=wages
Land=rent
A model - ANSWER-A simplified representation of reality used to create hypotheses
about economic decisions and events
Production - ANSWER-Any economic activity that leads to a flow of goods and
services for which people are willing and able to pay
Production possibility frontier - ANSWER-A curve showing the maximum quantities
of different combinations of goods and services that can be produced in a set time
period given the available resources and current state of technology
Law of diminishing returns - ANSWER-As a firm adds variable factors of
production(usually labour) to fixed capital, the marginal returns that the firm gains
will gradually begin to decrease
Consumer good - ANSWER-A finished good that is sold for consumption
Capital good - ANSWER-Ant tangible asset that an organisation uses to produce
goods or services such as office buildings, machinery etc.
Specialisation - ANSWER-Where individuals, businesses and whole economies are
not self-sufficient but concentrate on producing certain goods and services, then
trading their surplus.
, Division of labour - ANSWER-The assignment of different parts of a manufacturing
process or task to different specialised people in order to improve efficiency
Productivity - ANSWER-Output of a good or service, per factor of production, per
period of time
Functions of money - ANSWER-A medium of exchange-it should be accepted
universally for the payment of goods, services and debt
Unit of account-It allows the value of goods, services and other assets to be
compared so that the prices of products reflect the value that society places on them
Standard of deferred payment-Money can be used to pay back debt
Store of value-It must be possible to use for future transactions and so it must be
non-diminishable
Resource allocation - ANSWER-The way in which a society's factors of production are
divided amongst their alternative uses
Objectives of households - ANSWER-Households make decisions about how to
allocate expenditure based on the utility they derive from consuming a good or
service
Objectives of firms - ANSWER-Firms make decisions about what to produce and how
much to produce (how to use their factors of production) in order to receive a
return/profit for their endeavours.
Objectives of the government - ANSWER-Government's objectives are to maximise
social welfare and will do this through decision making regarding taxation to fund
public expenditure, enforcement of laws and regulation that provide a system for
the market to work in. May aim to achieve 'macroeconomic performance indicators'
Utility maximisation - ANSWER-The aim of trying to achieve the highest level of
satisfaction possible from the consumption/production of a good
Profit maximisation - ANSWER-The aim of trying to achieve the highest levels of
profit possible
Incentives for households - ANSWER-Their decisions will depend on the benefits
gained form consumption relative to the costs involved. Both including the price and
the opportunity cost of consumption A04: Time delays may mean consumers may
take time to respond to changes in price and firms may take time to respond to
consumer's changes in tastes. Workers may also not seek the highest wage possible
as they may do a job to fulfil a sense of vocation or for the non-pecuniary benefits.
Incentives for firms - ANSWER-Firms decisions will depend on the potential profits
that supplying a product can create. EG. if the price of a product rises, a firm has an
