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Details Title: Econ 200 Final Review Description: University of Arizona-Prof. Johnson Total Flash Cards: 73 Created: 05/06/2007 13:10:06	To study from this set of flash cards, or to create your own your own study flash cards, register HERE. If you are already a registered user, CLICK HERE.
Cards Term The overriding reason why households and societies face many decisions Definition resources are scarce Term In most societies, how are resources are allocated Definition the combined actions of millions of households and firms Term Society faces a trade off between Definition efficiency and equity Term Efficiency can be described as Definition minimum waste Term Since efficiency refers to the size of the economic pie, equity refers to... Definition how the pie is divided Term In economics, the cost of something is... Definition what you give up to get it Term Making rational decisions at the margin means that people Definition compare marginal costs and marginal benefits of each decision. Term These rights help make sure the markets work well Definition property rights Term The primary determinant of a country's standard of living Definition the country's ability to produce goods and services Term Economists make assumptions so they can... Definition focus thier thinking on the essence of the problem at hand Term True or False: An ecomomy by itself can produce at any point on or inside the production possibilities frontier, but not outside it Definition True Term Whay are production possibility curves bowed outward Definition resources are speciallized, that is, some are better at producing particular goods rather than other goods Term If a point is within the Production Possibilities Frontier curve (not on or anywhere else on the graph) it is said to be Definition ineffcient Term An improvement in the PPF curve can be reflected as an increase in the production of the good(s). Better production can be explained by... Definition A technological advance in the the production of the good(s) Term If labor in Mexico is less productive than labor in the United States in all areas of production, both Mexico and the United States still can benefit from... Definition trade Term Absolute Advantage Definition The person who is more efficient Term Comparative Advantage Definition The person who has a smaller opportunity cost in production Term Total output in an economy increases when each person specializes because... Definition each person spends more time producing within each country due to specialization Term The term market always refers to Definition a group of buyers and sellers of a particular good or service Term Buyers and sellers who have no influence on market price are referred to as Definition price takers Term If a seller in a comparative market chooses to charge more than the market price, then Definition buyers will tend to make purchases from other sellers Term true or false technology is not a determinant of demand Definition false Term If a seller in a competitive market chooses to charge more than the market price, what will buyers do. Definition buyers will tend to make purchases from other sellers Term Normal Goods Definition an increase income will result in an increase in demand Term Two goods are compliments if a decrease in the price of one good does this to demand Definition increases the demand Term What does the market demand curve represent Definition the sum of the quantities demanded by all the buyers at each price of the good Term Suppose you make jewelry. If the price of gold falls, we would expect you to do this... Definition be willing and able to produce more jewelry than before at each possible price Term An advance in technology does this to the supply and demand curves Definition shifts the supply curve to the right, but demand curve is unaffected Term If, at a current price, there is a shortage of a good, the price is said to be Definition below the equilibrium price Term When supply and demand both increase, equilibrium price can do this Definition increase, decrease, or stay the same Term when studying how some event or policy affects the market, elasticity provides information on Definition the magnitude of the effect on the market Term If a good has very few substitutes, it tends to be a(n) _______________ good Definition inelastic Term Economists compute the price elasticity of demand by Definition the percent change in quatitiy demanded divided by the percent change in price Term the greater the responsiveness of quantity demande to a change in price, the greater the _____________________. Definition price elasticity of demand Term Suppose a good is prefectly inelastic, and the supply of the good decreases what happens to the equilibrium price and quantity demanded Definition price increases, quantity is unchanged Term A price ceiling is binding when it is set Definition below the equilibrium price causing a shortage Term When policy makers set prices by legal decree, the Definition are obscuring the signals that normally guide the allocation of societies resources Term The equilibrium price of a product is considered the be the best price because is maximizes Definition total revenue for firms and maximizes the quantity supplied of the product Term If an allocation of resources is efficient what is said of the potential gains from trade Definition all the potential gains from trade among buyers and sellers is being realized Term moving production from a high cost producer to a low-cost producer will Definition rais total surplus Term If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will Definition increase consumer surplus Term A simultaneous increase in both the demand for a good and the supply for a good would imply what about the value and cost of the good Definition the value of the good to consumers has increased and the cost of producing radios has decreased Term A technological advance in the production of a good will Definition increase consumer surplus in the market for the good and increase producer surplus in a complementary market Term What is the equation for loss in consumer surplus caused by a tax Definition Loss of consumer surplus=(1/2)(P3-P2)(Q1+Q2) Term Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, in these three properties Definition 1. less elastic demand for the good 2. smaller the amount of tax 3. less elastic supply of the good Term If the domestic price of a good in the US is lower than the world price of a good this suggests that Definition The US has a comparative advantage over the other countries and the US will export the good Term When a country allows trade and becomes an exporter of a good what happens to the domestic producers and consumers Definition domestic producers gain and domestic consumers lose Term when a country allows trade and becomes an importer of a good this happens to producers and consumers Definition domestic producers become worse off, and domestic consumers become better off Term This type of profit never exceeds accounting profit Definition Economic Profit Term Economists normally assume that a goal of a firm is to do this with its profits Definition maximize profits Term what makes up the accounting profit Definition accounting profit=economic profit+implicit costs Term marginals cost tells us this Definition the amount by which total cost rises when output is increased by one unit Term when marginal cost exceeds average total cost Definition average total cost must be rising Term marginal cost is equal to average total cost when Definition average total cost is at its minimum Term In a competitive market the actions of any single buyer or seller will this impact on a market Definition negligible Term When a profit-maximizing firm in a competitive market has zero economic profit, accounting profit Definition is positive Term The short run supply curve for a firm in a perfectly competitive market is Definition the portion of its marginal cost curve that lies above its average variable cost Term when profit maximizing firms in acompetitive markets are earning profits Definition new firms will enter the market Term A competitive market is in long-run equilibrium. If demand decreases, we can be certain that price will Definition fall in the short run. all, some, or no firms will shut down, and some of them will exit the industry. prices will then rise to teach the new long-run equilibrium Term True or False: the monopolist produces where P=MC Definition False Term Externality Definition the uncompensated impact of one person's actions on the well-being of a bystander Term When externalities are present in a market this happens to participants Definition participants lose some market benefits to bystanders Term When a market is characterized by an externality, the government Definition can correct the market failure in the case of both positive and negative externalities by indicng market participants to internalize the externality Term selling pollution permits is a better method for reducing pollution than imposing a corrective tax because Definition it is hard to estimate the market demand curve and thus charge the "right" corrective tax Term both public goods and common resources are Definition nonexcludable Term the tragedy of commons occurs because Definition social and private incentives differ Term In computing the GDP, market prices are used to value final goods and services because Definition market prices reflect the values of goods and services Term Consumer Price Index Definition a measure of the overall cost of the goods and services bought by a typical consumer Term Steps of calculating the CPI Definition 1. Fix the basket 2. Find the prices 3. Compute the basket Cost 4. Choose a base year and compute the index CPI=(Price of Basket/Base Yr. Basket)x100 Term Given the situation when is GDP recoreded: A car dealership has an increase in inventory of 25 cars in 2006. In 2007 it sells all 25 cars. Definition 2006 Term Nominal GDP Definition values production at current prices Term Real GDP Definition values production at constant prices Term GDP fails to account for this Definition quality of the environment