1. Economics studies those aspects of human behavior relating to working, producing goods, distributing them, and consuming them.  


Because of scarcity, each of us is forced to make choices.  

3. Society's problem is a scarcity of resources-the things we use to make goods and services.  

4. Microeconomics studies the behavior of individual households, firms and governments, the choices they make, and their interaction in specific markets and industries.  

5. Total production of every good or service will be greatest when individuals specialize according to their comparative advantage.  

6. Supply and demand explains how prices are determined in competitive markets.  

7. The law of demand states that when the price of a good rises, and everything else remains the same, the quantity of the demanded will fall.  

8. Any change in the price of one good changes the trade-off between the two goods.  

9. In pure competition, the firm is a price taker-it treats the price of its output as given.  

10. Unlike purely competitive firms, monopolies may earn economic profit in the long run.  

11. Antitrust policy can sustain competition by preventing mergers between large competitors.  

12. In the long run, monetary policy can change the rate of inflation, but not the rate of unemployment.  

13. When the marginal product of labor increases with a rise in employment, there are increasing marginal returns to labor.  


Stagnation combined with inflation is called stagflation.  

15. It used to be thought that inflation and unemployment were trade-offs, but contemporary inflation has persisted despite the presence of unemployment.  


Inflation is a redistributive process, a zero-sum game.  

17. One cost of inflation to the economic system is the loss of reliable guides to price relationships.  

18. In the past years, a sharp disinflation has appeared largely because of tight money policies.  

19. More people will come to deposit their money in the bank when the interest rate goes up.  


Owning the rise in prices people reduced their deposit in the bank.  


The interest rate has adjusted due to the rise in prices.  

22. For the firm's owners, opportunity cost is the total value of everything sacrificed to produce output.  

23. In an economic sense, demand is the quantity of a good or service for which consumers are willing to pay a given price at a given time.  

24. Someone's desire for something can not be termed as effective demand in an economic sense.  

25. In the circle of economics, supply is the quantity of a good or service that producers will offer at a given price at a given time.  

26. Therefore when businesses set a price for a product, they have to take both their profit and consumers' purchasing power into account.  


Consumers will not buy a product if it is priced beyond their budget.  

28. Once a coin becomes recognized as a rarity its value frequently increases every time it changes hands.  

29. The marginal approach to profit states that a firm should take any action that adds more to its revenue than to its cost.  

30. During a period of inflation the real value of wages may fall although nominal wages rise.