1. T or F Microeconomics is the study of economics which includes the national e

Question

1. T or F Microeconomics is the study of economics which includes the national economy and a basic knowledge of how things work in the business world. 2. Ior F Supply and demand refer to the amount of product a company can produce based on local resources 3. T or E The incentive principle attempts to predict consumer behavior and even modify this behavior by offering incentives. 4. T or E A determinate of demand would be production costs 5. Tor F A comparative advantage would be when a country or company can | produce a good at a lower opportunity cost than a competitor. 6. or F The scarcity principle is an economic principle in which a limited supply of goods coupled with a high demand for that good, results in a mismatch between the desired supply and demand causing an increased price for said good(s) 7. T or F Macroeconomics refers to the smaller picture and focuses more on basic much of something to produce and how much to charge for it 8. I or F When production of a product is stable and demand increases, price will theories of supply and demand and how individual businesses decide how decreasee 9. I or F Absolute advantage is the ability of a country, individual, company or regiorn to produce a good or service at a lower cost per unit than the cost at which any other entity produces that good or service. Example - Mid-East countries (Tran/iraq) can produce oil cheaper because it is readily available, easier to obtain and requires less refining than United States oil. 10. T or F Opportunity cost refers to what you sacrifice in making an economic choice 11. I or F Principle of Increasing Opportunity Cost is also known as the Low Hanging Fruit Principle 12. 1 or F The field of economics is broken down into three distinct areas, microeconomics, macroeconomics and general economics 13. I or F The equilibrium principle (also known as the No-Cash-on-the-Table principle) is the point where supply equals demand for a product

Explanation / Answer

1. False

Microeconomics studies economic problems and economic relations at the level of individual. National income is the macroeconomics concept.

2. False

Supply shows amount of product firm is willing to sell at different prices while demand shows the quantity which consumers are willing to purchase at different prices.

3. True

4. False

Production cost is the determinant of supply. Determinants of demand are Price of commodity itself, price of related goods, income of consumer, taste and preference of the consumer, expectation of the consumer.

5. True

A country has a comparative advantage in producing that good if the opportunity cost of producing that good is lower in that country as compared to another country.

6. True

Scarcity occurs when demand of good exceeds its supply. This causes increase in the price of good which causes decrease in demand and equilibrium is attained.

7. False

Macroeconomics is the study of economic relations and economic problems at the level of economy as a whole. Individual firm or Individual consumer's demand does not play any role.

8. False

When supply is constant and demand increases then price of good will increase in the market which causes demand to decrease and equilibrium is attained.

9. True

Absolute advantage is the ability of a country to produce a good or service at a lower per unit cost as compared to any other country that produces same good or service.

10. True

Opportunity cost is the value of next best alternative foregone.

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