Econ 2020 Midterm 1

Question 1

Define economics

Answer 1

The study of how any society best allocates it scarce economic resources among many, competing uses

Question 2

Define productivity efficiency

Answer 2

full utilization of the scarce economic resouces

Question 3

Define allocative efficiency

Answer 3

implies that the production combination is optimal from society’s point of view

Question 4

Four categories of economic resources

Answer 4

land
labor
capital
entrepreneurship

Question 5

Define scarcity

Answer 5

refers to the economic resources

Question 6

What are the three fundamental economic questions

Answer 6

what goods/services get produced = individuals
how to produce = firms
for whom to produce = individuals with money

Question 7

5 steps of the scientific method

Answer 7

identify the problem
make assumptions
develop a model
make a prediction
test the model

Question 8

Define normative analysis

Answer 8

opinion ; can’t be tested

Question 9

Define positive analysis

Answer 9

is the analysis of “what is” ; can be proven to be right / wrong

Question 11

What does the Production Possibilities frontier represent

Answer 11

shows maximum production combinations of goods/services that a nation can produce given its resources and institutional constraints

Question 12

What does it mean to be inside the PPF

Answer 12

something that is currently attainable but not using all resources efficiently

Question 13

What does it mean to be outside the PPF

Answer 13

something that is attainable in the future by
- increase stock/qty of economic resources
- improve the quality of existing resources
- relax restraints (rules/regulation)
- TRADING

Question 14

Define absolute advantage

Answer 14

one nation/state/firm is “better at producing” a good/service than another state/nation/firm
USING FEWER RESOUCES

Question 15

Define Comparative Advantage

Answer 15

one nation/state/firm is “better at producing” a good/service than another nation/state/firm
HAVING LOWER OPPORTUNITY COST

Question 16

Measures a nation (or state) can take to protect itself against trade

Answer 16

tariff
quota
embargo

Question 17

Define Demand

Answer 17

The amount of a good/service that consumers are both willing and able to buy at every possible price in a given period of time

Question 18

Define Quantity Demanded

Answer 18

The amount of a good/service that consumers are both willing and able to buy at a specific price in a given time period, ceteris paribus

Question 19

Define Supply

Answer 19

the amount of a good/service that firms are both willing and able to offer for sale at every possible price in a given time period, ceteris paribus

Question 20

Define quantity supplied

Answer 20

the amount of a good/service that firms are both willing and able to offer for sale at a specific price in a given time period, ceteris paribus