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Ag Econ review for exam 1 > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

Definition of Economics

A

The study of how individuals and society choose to use the scare resources that nature and previous generations have provided.

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2
Q

Three key concepts in economics

A

Opportunity cost
sunk cost and marginal cost
efficient market

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3
Q

Define Opportunity Cost

A

The best alternative that we give up when we make a choice or decision.

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4
Q

Define Sunk Cost

A

Costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred (represents the past).

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5
Q

Define Marginalism

A

The process of analyzing the additional or incremental cost or benefits arising from a choice or decision.

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6
Q

Define Efficient Market

A

Marhet in which profit opportunities are eliminated almost instaniously.

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7
Q

Economic Methodology

A

Economics theory (theoretical economics), descriptive economics, empirical economics, variables, theory, model, Ceteris Paribus.

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8
Q

Define Economics Theory

A

involves the interpretation of this data as well as the formation of hypotheses.

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9
Q

Define Descriptive Economics

A

involves gathering and compiling data about the economy. Descriptive economics occurs when economists make observations, notice patterns and record facts.

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10
Q

Define Empirical Economics

A

The collection and use of data to test economic theories.

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11
Q

Define Model

A

a formal statement theory, usually a statement of presumed relationship between 2 or more variables.

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12
Q

Define Ceteris Paribus

A

(all is equal) Device used to analyze the relationship between 2 variables while the values of other variables are held unchanged.

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13
Q

Two types of economic analysis

A

Normative economics and Positive economics

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14
Q

Define Normative Economics

A

An approach to economics that analyzes outcomes of economic behavior, evaluates them as good or bad, and may prescribe course of action.

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15
Q

Define Positive Economics

A

An approach to economics that seeks to understand behavior and the operation systems without judgement. It describes what exists and how it works.

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16
Q

Two Branches of Economics

A

Microeconomics and Macroeconomics

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17
Q

Define Microeconomics

A

The branch of economics that examines the functions of individual industries and the behavior of individual industries.

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18
Q

Define Macroeconomics

A

Examines the economic behavior of national production/output. Ex. GDP.

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19
Q

Four Criteria of Economics

A

Efficiency, Equity, Growth, and Stability

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20
Q

Define Efficiency

A

Refers to allocative efficiency. An efficient economy is one that produces what people want at the least possible cost.

21
Q

Define Equity

A

Fairness. Weather its fair or not Doesn’t mean both sides are equal.

22
Q

Define Growth

A

an increase in the total output of an economy.

23
Q

Define Stability

A

a condition in which national output is growing steadily.

24
Q

Three Fundamental Questions facing each economics

A

What gets produced? How it gets produced? Who gets what is produced?

25
Q

Three fundamental inputs/resource/factors in production

A

Land, Labor, and Capital

26
Q

One Graphical Tool

A

Production Possibility Frontiers (PPF)

27
Q

Define PPF

A

is a curve or a boundary which shows the combinations of two or more goods and services that can be produced whilst using all of the available factor resources efficiently.

28
Q

Three concepts illustrated in a PPF graph

A

Efficiency (production and economic efficiency), Opportunity Cost, and economic growth

29
Q

Define Production Efficiency

A

An economic level at which the economy can no longer produce additional amounts of a good without lowering the production level of another product. This will happen when an economy is operating along its production possibility frontier.

30
Q

Define Economic Efficiency

A

A broad term that implies an economic state in which every resource is optimally allocated to serve each person in the best way while minimizing waste and inefficiency. When an economy is economically efficient, any changes made to assist one person would harm another.

31
Q

Two types of Economic Advantage

A

Absolute and Comparative Advantage

32
Q

Define Absolute Advantage

A

A producer has a absolute advantage over another if he or she an produce that product using fewer resources, or if they can produce more with the same resources.

33
Q

Define Comparative Advantage

A

Free trade benefits all trading partners because through voluntary cooperation and exchange, the whole can become greater the sum of its parts.

34
Q

Two economic systems

A

Laissez Faire and Command Economics

35
Q

Define Laissez Faire Economics

A

French term “allow them todo” economy in which individual people and firms pursue their won self-interest without any central direction or regulation.

36
Q

Define Command Economics

A

An economy in which a central government either directly or indirectly sets output targets, income and price.

37
Q

Two characteristics of a Laissez Faire economy

A

Consumer Sovereignty and Free enterprise

38
Q

Define Consumer Sovereignty

A

Idea that consumers ultimately dictate what will be produced (or not) by choosing what to produce (or not to).

39
Q

Define Free Enterprise

A

Freedom of individuals to state and operate private businesses in search of profit.

40
Q

Define Production

A

Process of transporting goods and services

41
Q

Define inputs

A

Anything provided by nature or previous generations that can be used directly or indirectly to satisfy human wants Land Labor Capital.

42
Q

Define outputs

A

Goods and services value to a household.

43
Q

Define Capital Goods

A

Things that are produced and then used in the production of other goods and services.

44
Q

Define Choice

A

Is an act of choosing between two or more possibilities.

45
Q

Define Fallacy of Composition

A

The belief hat what is true for a part is not necessarily true for the whole.

46
Q

Define Post Hos Fallacy

A

Literally, “after this in time, therefore be this”. A common error made made in thinking about causation. If event A happens before event B, it is not necessarily true A caused B to happen.

47
Q

Define consumer goods

A

goods bought and used by consumers, rather than by manufacturers for producing other goods.

48
Q

Define Investment

A

The process of using resources to produce new capital.

Ag Econ review for exam 1 (1 decks)

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