Economics Today: Principles of Microeconomics Review

Comprehensive fill-in-the-blank practice flashcards covering fundamental economic concepts, production possibilities, supply and demand, elasticity, and consumer choice theory.

__________ is the study of decision making undertaken by individuals (or households) and by firms.

Microeconomics

__________ deals with aggregates, or totals, and is the study of the behavior of the economy as a whole.

Macroeconomics

The three basic economic questions that every society must answer are what and how much will be produced, how items will be produced, and __________ items will be produced.

for whom

A decentralized decision-making process in which prices are used as signals to make all economic decisions is known as a(n) __________.

price system (market system)

The assumption that people do not intentionally make decisions that would leave them worse off is called the __________.

rationality assumption

The Latin term __________ means 'other things constant' or 'other things equal.'

ceteris paribus

The hypothesis that people are nearly, but not fully, rational and instead rely on rules of thumb to make decisions is known as __________.

bounded rationality

Statements limited to purely descriptive assertions or scientific predictions of 'what is' represent __________ economics.

positive

Analysis involving value judgments regarding whether economic outcomes are good or bad, representing 'what ought to be,' is called __________ economics.

normative

Congress allocated $\$7.5\text{ billion}$ to build an EV charging station network, requiring private companies to adopt the government's preferred __________ standard connector.

CCS

__________ occurs when the ingredients for producing things that people desire are insufficient to satisfy all wants at a zero price.

Scarcity

The five factors of production are land, labor, physical capital, human capital, and __________.

entrepreneurship

The highest-valued, next-best alternative that must be sacrificed to obtain something or satisfy a want is the __________.

opportunity cost

The bowed outward shape of the production possibilities curve is accounted for by the law of __________.

increasing additional cost

In the provided Production Possibility Curve (PPC), point __________ represents an inefficient point where resources are not generating maximum possible output.

$$S$$

An increase in the production of __________ goods today stimulates economic growth and shifts the production possibilities curve farther outward in the future.

capital

The ability to produce a good or service at a lower opportunity cost compared to other producers is known as __________.

comparative advantage

The ability to produce more units of a good using a given quantity of labor or resource inputs is defined as __________.

absolute advantage

The law of demand states that there is an inverse or negative relationship between the price of a good and its __________.

quantity demanded

The price of a commodity expressed in terms of another commodity is called its __________.

relative price

A good for which demand falls when income rises is categorized as a(n) __________ good.

inferior

Two goods are considered __________ when an increase in the price of one good causes an increase in the demand for the other good.

substitutes

A change in a good's own price generates a movement along the demand curve, which is properly referred to as a change in __________.

quantity demanded

A cash grant or payment from the government per unit to a producer is called a(n) __________.

subsidy

In the provided market equilibrium diagram, at a price of $\$1$, the market experiences an excess quantity demanded, creating a shortage of __________ million camera apps.

$$8$$

A situation where quantity supplied exceeds quantity demanded at any price above the market clearing price is called a(n) __________.

surplus

Price elasticity of demand ($E_p$) measures the percentage change in quantity demanded divided by the __________.

percentage change in price

Demand is described as __________ when a given percentage change in price results in a larger percentage change in quantity demanded ($E_p > 1$).

elastic

A vertical demand curve has a price elasticity of demand equal to zero and is classified as __________.

perfectly inelastic

As shown in Panel (b), a horizontal demand curve at a given price illustrates __________ demand.

perfectly elastic (infinite elasticity)

If demand is inelastic ($E_p < 1$), an increase in price causes total revenues to __________.

increase (rise)

If the cross price elasticity of demand between two goods is positive ($E_{xy} > 0$), the goods are __________.

substitutes

Because producers have more time to reallocate resources and enter or exit the market, supply is more elastic in the __________ run.

long

A representative unit by which utility is measured was developed by philosopher Jeremy Bentham and is called the __________.

util

The change in total utility resulting from a one-unit change in the quantity of a good consumed is defined as __________.

marginal utility

Total utility reaches its maximum level when marginal utility equals __________.

$$0$$

The rule of consumer optimum requires that the consumer allocate income so that the __________ per dollar spent is equalized across all goods purchased.

marginal utility

The tendency of consumers to react to a price increase by purchasing more of relatively cheaper alternatives is the __________ effect.

substitution

A curve showing a set of consumption alternatives that all provide the identical level of total satisfaction is a(n) __________ curve.

indifference

In the indifference curve diagram shown, the consumer optimum is identified at point __________ where the budget line is tangent to the highest attainable indifference curve.

$$E_1$$