Introduction to Microeconomics – Core Concepts and Principles

Fill-in-the-blank flashcards covering scarcity, factors of production, opportunity cost, marginal analysis, PPC, market systems, price mechanism, equilibrium, firm objectives, and related microeconomic concepts.

__ arises from limited resources and unlimited wants.

Scarcity

Physical, man-made resources such as machines and factories are known as __ capital.

physical (or simply “capital”)

The factor of production that organises other FOPs and bears business risk is __.

entrepreneurship

All natural resources, whether renewable or non-renewable, are classified as the factor of production called __.

land

Skills and abilities embodied in people constitute the FOP known as __.

labour

The expected benefits from the next best alternative forgone is termed __ cost.

opportunity

Costs that require direct monetary payment are called __ costs.

explicit

Costs such as time, effort or satisfaction that do not require monetary payment are __ costs.

implicit

Because it depends on individual tastes and constraints, opportunity cost is __ (subjective/objective).

subjective

Economic agents continue an activity until the point where marginal benefit equals __.

marginal cost

Under the Marginalist Principle, an activity should be expanded as long as MB is __ than MC.

greater

For consumers, the additional satisfaction from one more unit consumed is called marginal __.

utility

The Law of Diminishing Marginal Utility states that beyond a point, additional consumption yields __ (increasing/decreasing) MU.

decreasing

For producers, the extra revenue from selling one more unit is called marginal __.

revenue

When MC rises because variable factors become less productive with fixed factors, this illustrates the Law of Diminishing __.

Marginal Returns

Governments aim to maximise social welfare by equating marginal social benefit to marginal social __.

cost

The three fundamental economic questions are: What to produce? How to produce? and __ to produce for?

For whom

In a __ market economy, resource allocation occurs through prices with minimal government intervention.

free

A __ or command economy allocates resources through state planning.

planned

Most real-world economies are best described as __ economies, combining public and private sectors.

mixed

A Production Possibility Curve shows all maximum attainable combinations of two goods when resources are fully and __ employed.

efficiently

Because resources are not equally suited to all goods, the PPC is __ to the origin.

concave

Producing on, rather than inside, the PPC demonstrates __ efficiency of resources.

productive

Producing the single combination of goods that maximises society’s welfare shows __ efficiency.

allocative

Moving from a point inside the PPC to the curve itself represents actual economic __ (A.E.G).

growth

A rightward shift of the entire PPC indicates an increase in __ capacity (P.E.G).

productive

Improved technology or upskilling labour will cause the PPC to shift __ (inward/outward).

outward

In free markets, prices perform signalling, rationing and __ functions.

incentive

Market equilibrium exists where quantity demanded equals quantity __.

supplied

A price above equilibrium creates a market __ (surplus/shortage).

surplus

A price below equilibrium leads to a __, putting upward pressure on price.

shortage

The entire relationship between price and quantity demanded is the demand __.

curve (DD)

A single amount consumers purchase at one specific price is termed quantity __ (Qd).

demanded

Total profit equals total revenue minus total __.

cost

When TR > TC, a firm earns __ (supernormal/normal) profit.

supernormal

Profit-maximising producers choose output where MR equals __.

MC

True profit maximisation may fail because firms lack accurate __ about demand and costs.

information

The conflict between shareholders (owners) and managers (controllers) is called the __-agent problem.

principal

Firms focused on maximising total revenue will expand output until __ equals zero.

marginal revenue (MR)

Choosing an acceptable rather than maximum profit level is known as profit __.

satisficing

Market share is calculated as a firm’s total sales revenue divided by total __ revenue.

market

Lowering price below the profit-maximising level to keep rivals out is an example of __ pricing.

limit (or entry-deterrent)

Deliberately setting prices so low that rivals incur losses is known as __ pricing.

predatory

In the ABCDE decision framework, the letter ‘C’ stands for assessing __ and constraints.

costs

Rational economic agents aim to maximise benefits and minimise __.

costs

Explicit and implicit costs together comprise the full __ cost of a decision.

opportunity

A fall in unemployment that moves production from inside toward the PPC illustrates better utilisation of existing __.

resources

A parallel outward shift of the PPC occurs when new factors raise productivity of __ goods equally.

both

Perfect competition assumes many buyers and sellers plus __ barriers to entry and exit.

low