Man Ec: #6 Flashcards Preview

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Flashcards in Man Ec: #6 Deck (11)
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1
Q

The price system coordinates a capitalistic market by answering three basic questions…

A

1) How to produce
2) what to produce
3) whom to produce it for

2
Q

An economy is successful when it is impossible to get more ______ from a given resource.

A

output

3
Q

Define efficiency

A

if it is impossible given available resources, to implement an alternative arrangement under which all parties involved are at least as well off.

4
Q

Is there a larger output through the idea of specialization or through self-sufficiency?

A

through specialization so long as there is something to coordinate things so that the computer programmer can also have food and the farmer can also have a car etc.

5
Q

What system (market, socialistic, communistic, etc) takes the least amount of information to be efficient?

A

the market economy because all someone needs to know is local information and system wide prices.

6
Q

Production efficiency is looked at as the first thing needed in moving toward a efficient market. (rather than product mix or exchange efficiency) What is product efficiency?

A

looks at economy from the perspective of inputs into the production process.

7
Q

Isoquant means?

A

shows all the possible combinations of inputs such as capital (k) and labor (l) that yield the SAME output

8
Q

Isocost lines are?

A

lines drawn in a graph relating units of labor to units of capital as well

9
Q

The slope of a isoquant is in the terms of change in captial / change in labor. This slope is called the marginal rate of technical substitution of labor for capital. Say this in other words.

A

This means when one less unit of labor is used there must be some amount of capital added, and vice versa.

10
Q

total cost for an isocost line can be written as C=wL+rK. What does this mean?

A

cost=price of laborlabor+cost of capitalcapital

11
Q

An isocost line is bounded by the given cost outlay (or budget essentially) TO find the most efficient production you must find where the isocost line and the isoquant _________

A

intersect. This means that at that certain budget, that the isocost will tangent an esoquant based on a certain quantity which is bounded by the isocost because of the given budget (cost outlay)