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Econ ch. 1 and 2
Microeconomics
46
Economics
Undergraduate 1
09/08/2016

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Cards

Term
In the circular flow diagram, what do firms produce?
Definition
1) goods and services using the factors of production
2) outputs using inputs
Term
Which markets are represented in the simple circular flow diagram?
Definition
markets for goods and services and markets for factors of production
Term
Which of the following takes place in the markets for the factors of production in the circular flow diagram?
A) Dylan receives a salary for his work as a financial analyst for an investment firm
B) Kristin buys two business suits to wear to her job
C) Jim receives clean water in his home in exchange for paying his water bill
D) Caroline owns a nail salon and receives payments from her clients for her services
Definition
A) Dylan receives a salary...
Term
The outer loop of the circular flow diagram represent the flows of dollars in the economy. Which of the following does not appear in the outer loop?
A) wages
B) income
C) capital
D) rent
Definition
C) capital
Term
According to the circular flow diagram, if Denny is the owner of a landscaping business and he just received $50 for mowing Mrs. Pendleton's lawn...
A) The $50 represents a cost of production for Denny's firm
B) the $50 represents wages, rent, and profit to Denny's firm
C) Denny acts as a firm who interacted in the markets for factors of production with Mrs. Pendleton
D) Denny acts as a firm who interacted in the markets for goods and services with Mrs. Pendleton
Definition
D
Term
Any point on a country's PPF represents a combination of two goods that an economy can produce using ____ of available ____ and ____.
Definition
can produce using ALL available resources and technology
Term
Production is efficient if the economy is producing at a point
Definition
ON the PPF
Term
When an economy is operation inside its PPF, we know that...
Definition
there are unused resources or inefficiencies in the economy
Term
On a bowed shape PPF, as you move down along the curve...
A) more of one good must be given up to receive one unit of the other good
B) the available production technology doesn't change
C) the opportunity cost increases
D) all the above
Definition
D
Term
Suppose an economy produces two goods, food and machines. This economy always operates on its PPF. Last year, it produced 1000 units of food and 47 machines. This year, it is producing 1050 units of food and 52 machines. Which of the following events could NOT explain the increase in output?
A) an improvement in technology
B) an increase in available labor
C) a reduction in unemployment
D) Any of these events could explain the increase in output
Definition
C
Term
Resources are ___ for households and ___ for economies
Definition
scarce, scarce
Term
Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This is an example of?
Definition
People facing tradeoffs
Term
The terms EQUALITY and EFFICIENCY are similar in that they both refer to benefits to society. How do they differ?
Definition
EQUALITY refers to the uniform distribution of those benefits (share) and efficiency refers to maximizing benefits from scarce resources
Term
Rational people make decisions at the margin by comparing...
Definition
marginal costs and benefits
Term
Which of the following is NOT an example of a group responding to and incentive?
A) Students attend class because of an attendance policy that reduces their grade for absences
B) Universities offer fewer online classes when they generate more revenue than traditional classes
C) Consumers buy more of a product when it is on sale
D) Employees work harder to earn higher comissions
Definition
B
Term
Trade between countries tends to ___ competition and ___ specialization
Definition
increase, increase
Term
The invisible hand refers to...
Definition
how the decisions of households and firms lead to desirable market outcomes
Term
A rationale for government involvement in a market economy is as follows:
A) Markets sometimes fail to produce a fair distribution of economic well-being
B) Markets sometimes fail to produce an efficient allocation of resources
C) Property rights have to be enforced
D) all the above
Definition
D
Term
A worker in Bangladesh can earn $1/day making cotton cloth on a hand loom. A worker in the United States can earn $100/day making cotton cloth with a mechanical loom. What accounts for the difference in wages?
*hint: What about the labor
Definition
Labor is more productive making cotton cloth with a mechanical loom than with a hand loom
Term
Large or persistent inflation is almost always cause by..
Definition
excessive growth in the quantity of money
Term
Economists use some familiar terms in specialized ways to...
Definition
provide a new and useful way of thinking about the world
Term
Which of the following steps does an economist take when studying the economy?
A) devise theories
B) collect data
C) analyze data
D) all the above
Definition
D
Term
Economists make assumptions to
Definition
make the complex world easier to understand
Term
Economic models are useful because
Definition
are usually composed of diagrams and equations
Term
Factors of production are...
Definition
inputs into the production process
Term
What is scarcity?
Definition
the limited nature of society's resources
Term
What is economics?
Definition
the study of how society manages its scarce resources
Term
What is efficiency?
Definition
when society gets the most from its scarce resources
Term
What is equality?
Definition
when prosperity is distributed uniformly among society's members
Term
What is opportunity cost?
Definition
Whatever must be given up to obtain an item
Term
What is a marginal change?
Definition
incremental adjustments to an existing plan
Term
What is an incentive?
Definition
something that induces a person to act
Term
What are the principles of how people make decisions?
Definition
1) People face tradeoffs
2) The cost of something is what you give up to achieve it
3) Rational people think at the margin
4) People respond to incentives
Term
What are the principles of how people interact?
Definition
5) Trade can make everyone better off
6) Markets are usually a good way to organize economic activity
7)Governments can sometimes improve market outcomes
Term
What is a market?
Definition
group of buyers and sellers (not in one location)
Term
What are the 4 things we must determine to better organize economic activity?
Definition
1) WHAT goods to produce
2) HOW to produce them
3) HOW MUCH of each to produce
4) WHO gets them
Term
What system does the invisible hand work through?
Definition
the price system
Term
What determines prices?
Definition
the interaction between buyers and sellers
Term
What does price reflect?
Definition
the good's value to buyers and the cost of producing the good
Term
What is the important role of the government?
Definition
enforce property rights
Term
What is market failure?
Definition
when the market fails to allocate society's resources efficiently
Term
What are externalities?
Definition
when the production or consumption of a good affects bystanders
Term
What is market power?
Definition
a single buyer or seller has substantial influence on market price
Term
What are the principles of how the economy works as a whole?
Definition
8) A country's standard of living depends on its ability to produce goods and services
9) Prices rise when the government prints too much money
10) Society faces a short-run tradeoff between inflation and unemployment
Term
What is inflation?
Definition
increases in the general level of prices
Term
What is productivity?
Definition
the amount of goods and services produced per unit of labor
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