Chapter Review Questions
1. What is the difference between a "market" and a "perfect market?"
2. What is the difference between consumer surplus and producer surplus?
3. How does the price elasticity of demand affect consumer surplus and producer surplus?
4. How do the laws of supply and demand determine the equilibrium price of a good or service?
5. What is the effect of a price ceiling or a price floor on the market for a good or service?
6. How does the theory of comparative advantage explain international trade?
7. What are the benefits and costs of free trade?
8. What are some examples of government intervention in the market economy?
9. How does the government use monetary and fiscal policy to stabilize the economy?
10. What are some of the challenges facing the global economy?
Page 390
Chapter Summary
* Economic decision-making is all about making efficient choices with scarce resources.
* Opportunity cost is the value of the next-best alternative that is given up when a choice is made.
* Marginal thinking involves thinking about the additional benefits and costs of a choice.
* Positive economic statements are about what is, while normative economic statements are about what ought to be.
Page 391
Key Concepts
* Scarcity: the limited nature of resources
* Opportunity cost: the value of the next-best alternative that is given up when a choice is made
* Marginal thinking: thinking about the additional benefits and costs of a choice
* Positive economic statement: a statement about what is
* Normative economic statement: a statement about what ought to be