Micro 1/6 1st year

Question 1

what is a normative statement

Answer 1

a matter of opinion

Question 2

what is a positive statement

Answer 2

a matter of fact- can be proven

Question 3

what is the basic economic problem

Answer 3

how do we satisfy needs and wants with finite resources

Question 4

what info r PPFs designed to offer

Answer 4

shows us different production combinations that can be produced given a fixed resource stock

Question 5

what are feasible production points

Answer 5

a set of goods that can be produced w/ available resources

Question 6

what are infeasible production points

Answer 6

set of goods that cannot be produced with the available resources (outside ppt)

Question 7

what is productive efficiency

Answer 7

producing a combo of goods where you cannot increase the output of one good without decreasing the other

Question 8

what is the opportunity cost

Answer 8

profit lost when one alternative is selected over another

Question 9

what is productive inefficiency

Answer 9

producing a combo of goods where you can increase/decrease the output of one good without affecting the other good

Question 10

where on a PPD are points productively inefficient

Answer 10

any point inside the PPF due to resources not being fully employed

Question 11

what is productive capacity

Answer 11

the maximum amount of output that can be produced by a given firm/economy

Question 12

what causes an ouwards shift in PPF

Answer 12

discovery of resources + new inventions

Question 13

what causes an inwards shift in PPF

Answer 13

emigration + removal of funds

Question 14

features of a straight PPF

Answer 14

-perfect mobility of factors
-opportunity cost is the same at all points along the PPF
-constant returns to sale

Question 15

features of a concave PPF

Answer 15

-immobility of factors
-opportunity cost changes
-diminishing returns to sale
-more realistic

Question 16

definition of productivity

Answer 16

the amount of output produced per unit of input

Question 17

what are consumer and capital goods

Answer 17

consumer goods- consumption
capital goods- investment

Question 18

define allocative efficiency

Answer 18

allocating resources in the best way possible to maximise utility

Question 19

what is utility

Answer 19

the measure of overall satisfaction or wellbeing

Question 20

what is meant by rational decision making

Answer 20

economic agents responding to economic incentives

Question 21

what are features of homo economicus

Answer 21

rational, can compute well, logical, maximises utility, self interested

Question 22

define marginal utility

Answer 22

utility received from purchasing an extra unit of good

Question 23

define diminishing marginal utility

Answer 23

marginal utility received decreases as consumer buys more units

Question 24

what is perfect information

Answer 24

where both consumers and producers have access to the same info

Question 25

define imperfect information

Answer 25

where economic agents do not have access to all relevant info about a market

Question 26

what is a free market economy

Answer 26

goods and services produced in a system of markets facilitated by the price mechanism

Question 27

what is a command economy

Answer 27

goods and services produced on the basis of the resource allocation decided on by the state

Question 28

why do humans not act like homo economicus

Answer 28

computation, imperfect information, time

Question 29

what is bounded rationality

Answer 29

agents can attempt to apply rationality and reason to their decisions but cannot achieve perfect rationality due to an 'upper bound'