Exam 1

Question 1

Economics

Answer 1

The study of how to best fulfill our unlimited wants with our limited or scarce resources

Question 2

Macroeconomics

Answer 2

The study of national and international economic questions and concerns (effects people as a whole)

Question 3

Microeconomics

Answer 3

The study of individual economic concerns and questions (individual person or firm)

Question 4

Opportunity cost

Answer 4

the foregone alternative that you have to give up in order to take action

Question 5

Macro resources

Answer 5

land, labor, technology and capital

Question 6

micro resources

Answer 6

money and time

Question 7

What determines prices?

Answer 7

supply and demand

Question 8

Economists make decisions by comparing what to what?

Answer 8

Marginal cost vs marginal benefits

Question 9

What is the main way to think about the economy?

Answer 9

Anticipating shifts in demand

Question 10

tariff

Answer 10

taxes on goods

Question 11

tariffs create what?

Answer 11

deadweight losses

Question 12

Economists favor what over tariffs?

Answer 12

free trade

Question 13

How does the government get money?

Answer 13

from the citizens pockets

Question 14

Moral Hazard

Answer 14

When the knowledge that I will be bailed out encourages me to take on risky behavior

Question 15

Opportunity costs of going to college:

Answer 15

1. housing/rent
2. dining/food
3. tuition
4. parking pass
5. school equipment
6. social events
7. forgone salary
8. clothes
9. health issues
10. travel/gas

Question 16

Sunk Costs

Answer 16

buying or selling more stock after already losing money

Question 17

What happens when tips become exempt form income tax?

Answer 17

It leaves room for lots of fraud or money laundering.

Question 18

What is the marginal cost of a plate of food at an all you can eat buffet?

Answer 18

0 so eat all you can

Question 19

Markets

Answer 19

a collection of buyers and sellers

Question 20

Adam Smith

Answer 20

the father of market economics, recognized a market to work efficiently, we need a group of independent buyers and sellers

Question 21

Positive statment

Answer 21

can be tested; number based

Question 22

normative statement

Answer 22

can not be tested; opinion based

Question 23

CETERIS PARABUS

Answer 23

holding outside factors constant

Question 24

What are the three fundamental economic questions?

Answer 24

1. what to produce
2. how to produce
3. how to divide wealth

Question 25

Production Possibility Frontier PPF

Answer 25

shows what society could produce if they are using resources efficiently and there is no unemployment

Question 26

How can you find the opportunity cost of producing a good?

Answer 26

look at the slope of a PPF

Question 27

Allocative efficiency

Answer 27

highest amount of production while also making the most money

Question 28

productive efficiency

Answer 28

highest amount of production, inefficiency. Can be caused by unemployment

Question 29

What tells us the size of the frontier?

Answer 29

the amount of resources

Question 30

What economies are more productive than command economies?

Answer 30

market economies

Question 31

comparative advantage

Answer 31

determines what goods a nation specializes in or produces. Based on the opportunity costs. Determines trade

Question 32

absolute advantage

Answer 32

ability to produce at a lower cost