overview

Question 1

What are the 5 big picture ideas as the relate to ME

Answer 1

1. Scarcity
2. Production Possibilities frontier
3. The PPF can shift outward
4. Comparative advantage
5. changes in Markets

Question 2

Explain Scarcity

Answer 2

• economics focuses on scarcity and how it requires individuals, businesses and gov. to make CHOICES

Question 3

Explain the Production Possibilities frontier

Answer 3

shows the different combinations of 2 goods that can be produced using all countries resources

Question 4

The PPF can shift outward when what?

Answer 4

when there are more production from new Technology (or more resources)

Question 5

Comparative advantage

Answer 5

countries that have a comparative advantage can specialize in the production of specific goods and trade wit other countries at a LOWER OPPORTUNITY COST than if they produced everything on their own

Question 6

Changes in markets can be explained using what

Answer 6

a demand and supply graph

Question 7

Scarcity definiton

Answer 7

we have unlimited wants but limited resources therefore we are forced to make choices

Question 8

is money a resource?

Answer 8

no, you cannot produce anything with it

Question 9

What are the 4 Factors of Production

Answer 9

1. Land
2. Labour
3. Capital
4. Entrepreneurship

Question 10

Describe land (factors of production)

Answer 10

anything from nature like, water, minerals, crued oil, sunlight

Question 11

Define Labour

Answer 11

the work that people do

Question 12

What are the two types of capital

Answer 12

1. Physical capital (tools, machines, factories used to produce items)
2. Human capital (knowledge, experience and training that make workers more productive)

Question 13

What is Entrepreneurship

Answer 13

the person that brings together all their resources, starts the business and takes the risk

Question 14

What is Macroeconomics

Answer 14

• the collective decisions of everyone, the entire economy
• looks at things like growth, unemployment, inflation and different policies to speed up or slow down the economy

Question 15

What is mIxed economy

Answer 15

where individuals and government both plays a role

Question 16

What is Microeconomics

Answer 16

• study of small economic units
• looks at the decisions of individuals and firms
• things like cost of production kinds of markets

Question 17

What is centrally planned economy

Answer 17

• gov. owns the factors of produciton
• gov. decides what to produce, how to produce it and who gets it

Question 18

What is modern economy

Answer 18

combines free market and capitalism with some gov. interventions

Question 19

What is opportunity cost

Answer 19

• due to scarcity, we are forced to make choices

Question 20

What is the definition of opportunity cost

Answer 20

the cost of the next best alternative

Question 21

What does the Production Possibility Frontier show

Answer 21

shows alternative ways we can use our scarce resources to produce only 2 Goods

Question 22

What is the PPF table show

Answer 22

shows different combinations of 2 goods that can be produced using all of our resources

Question 23

PPF - explain the points inside the curve

Answer 23

• inefficient
• because we are not using our resources to the fullest

Question 24

PPF - explain the points outside the curve

Answer 24

impossible or unatainable

Question 25

PPF - explain the points on the curve

Answer 25

full employment - efficient

Question 26

What happens when the country goes form having a recession to having full employment

Answer 26

we go from an inefficient combination (inside the curve) where workers are not be fully utilized to an efficient one where workers are being fully utilized - this does not shift the curve ( we have the # of workers available)

Question 27

What if we had more workers or better workers, or more physcial capital, what happnes to the demand curve? Does this make sense?

Answer 27

it would shift outward because there would be new combinations possible

Question 28

Define Comparative Advantage

Answer 28

a country has a comparative advantage in producing a good if it can produce it at a lower opportunity cost than other countries

Question 29

How does comparative advantage relate to specialization and trade

Answer 29

comparative advantage encourages countries to specialize in producing goods where they have a comparative advantage (lower opportunity cost to produce) and trade for goods where they don't

Question 30

What is a benefit for all involved with comparative advantage

Answer 30

allows all participants to achieve greater overall output and efficiency ouput: produce more Efficency:

Question 31

What is the difference between Comparative Advantage and Absolute Advantage

Answer 31

even if one country has an absolute advantage in producing all goods, comparative advantage shows that both countries can still benefit from trade.

Question 32

Absolute advantage

Answer 32

refers to the ability to produce more of a good using fewer resources than others.

Question 33

How do you calculate Comparative Advantage (Steps)

Answer 33

1. identify which country has an absolute advantage for each good 2. calculate opportunity cost for each country 3. identify which coutnry has a comparative advantage 4. identify the terms of trade that is mutually beneficial for both countries

Question 34

Ex. of comparative advantage: country a can make 10 wheat per our and 5 cars per hour country b: can make 6 wheat per hour and 3 cars per hour 1. Which country is more efficient at producing wheat and which is more efficient at producing cars?

Answer 34

Country A is more efficient at producing both wheat and cars

Question 35

Ex. of comparative advantage: country a can make 10 wheat per our and 5 cars per hour What is the Opportunity cost in country A to produce 1 car

Answer 35

Producing 1 car costs 2 wheat (10/5 = 2)

Question 36

x. of comparative advantage: coutnry a can make 10 wheat per our and 5 cars per hour What is the Opportunity cost in country A to produce 1 wheat

Answer 36

Producing 1 wheat costs 0.5 cars (5/10 = 0.5)

Question 37

Ex. of comparative advantage: country a can make 10 wheat per our and 5 cars per hour country b: can make 6 wheat per hour and 3 cars per hour In country B: what is the opportunity cost to produce 1 car

Answer 37

Producing 1 car costs 2 wheat (6/3=2)

Question 38

Ex. of comparative advantage: country a can make 10 wheat per our and 5 cars per hour country b: can make 6 wheat per hour and 3 cars per hour In country B: what is the opportunity cost to produce 1 wheat

Answer 38

Producing 1 wheat costs 0.5 cars (3/6 =0.5)

Question 39

Which country has comparative advantage and - ADD MORE for determining terms of trade and absolute advantage

Question 40

What are terms of trade

Answer 40

both countries will be willing to trade if and only if they can get the other product at a lower opportunity cost than if they produce it themselves (if they trade then it needs to be mutually beneficial)

Question 41

Ex. USA makes 10 cars or 5 planes per day Canada makes 8 cars and 2 planes per day Identify which country has an absolute advantage for each good

Answer 41

Country Cars Planes USA 10 5 Can 8 2 USA has absolute advantage for each

Question 42

Country Cars Planes USA 10 5 Can 8 2 What is the opportunity cost for USA when they produce 1 plane What is the opportunity cost for USA when they produce 1 Car

Answer 42

Opp cost of 1 plane for USA is: 5/10 = 2 cars Opp. Cost of 1 car for USA is: 10/5 = 0.5 planes

Question 43

Country Cars Planes USA 10 5 Can 8 2 What is the opportunity cost for CAN when they produce 1 plane What is the opportunity cost for CAN when they produce 1 Car

Answer 43

Opp cost of 1 plane for CAN is: 8/2 = 4 Cars Opp. Cost of 1 car for CAN is: 2/8 = 1/4 plane

Question 44

Country Cars Planes USA 10 5 Can 8 2 What is the opportunity cost for CAN when they produce 1 plane What is the opportunity cost for CAN when they produce 1 Car who should specialize in producing cars and who should specialize in producing planes

Answer 44

Canada should specialize in producing cars 2/8 =1/4 plane (less opportunity cost than usa) USA should specialize in producing planes 5/10 = 2 cars

Question 45

If canada specializes in cars (add terms of trade)

Question 46

if us specialized in planes (add terms of trade)

Question 47

add definitions from text book

Question 48

What are the 5 Comparative advantage Hacks

Answer 48

1. spot output and input questions 2. 000 and IOU calculating the per opp. cost 3. 50/50 comparative advantage 4. terms of trade 5. Quick and Dirty method

Question 49

Explain spot output and input questions

Answer 49

Output - # of cars that can be produced (want higher numbers) Input - # of hrs it takes to produce one unit (want lower #s)

Question 50

explain000 and IOU

Answer 50

Output Q's = 0.0.0 - output = other goes over If calculating cost of cars - put # of planes over cars Input Qs= IOU Input = other goes under opp cost of one plane = plane / car

Question 51

explain 50/50 comparative advantage

Answer 51

its either one or the other, not both choose the one with lower opp cost input or output Q

Question 52

Terms of trade

Answer 52

add

Question 53

Quick and Dirty method

Answer 53

Output Q's US should specialize in cars or planes (can only be one) - multiply #s will show you the possible outcomes Country Cars Planes USA 5 1 China 3 2 USA = 5 x 2 = 10 China: 3 x 1 = 3 Pick the higher # 10 - this tells you the right outcome and who should specialize in what Input question - the answer would be the lower number