Chapter 1 - Econ issues and concepts

Question 1

Economics def

Answer 1

Study of use of scarce resources to satisfy unlimited wants

Question 2

Scare resources/scarcity def

Answer 2

Limited resources

Question 3

Factors of production what they are + name them (3)

Answer 3

A society’s resources : Land, labour,capital

Question 4

2 types of outpus

Answer 4

Goods (tangibles) or services (intangibles)

Question 5

What is implied by scarcity

Answer 5

need for choice

Question 6

Name of cost associated with each choice and how it is defined

Answer 6

opportunity cost : opp. cost of one commodity is amount of other commodities you could have instead

Question 7

Margin/marginal cost/marginal benefit

Answer 7

margin : refers to the choices to come. marginal cost/benefit = cost and benefit related to the next decision

Question 8

PPB graph meaning and things it illustrates and how

Answer 8

Production possibility boundary. scarcity choice and opportunity cost. scarcity = region above ppb slope. choice = region below ppb slope. opp. cost = ppb slope

Question 9

calculation of opportunity cost

Answer 9

direct cost of activity (represents $ I could have instead) + what you gave up in order to do it (represents things I could have instead) - savings the activity generates

Question 10

4 key economic problems

Answer 10

1. What is produced and how ? 2. What is consumed and by whom ? 3. Why resources are sometimes idle ?
2. Is productive capacity growing ?

Question 11

Resource allocation def

Answer 11

Quantities of various goods that are produced (how resources are allocated = how they are used = qt of stuff they allow to do)

Question 12

Microeconomics def

Answer 12

Study of allocation of resources as it is affected by the workings of the price system (how many done depending on price system)

Question 13

What instance can influence all 4 economic problems and why

Answer 13

Government policy by its design and effectiveness

Question 14

Market economy def.

Answer 14

Complex. Not coordinated. self organizing. self interested. Incentives. Specialized productive activities

Question 15

efficiency def

Answer 15

organizing available resources to produce goods and services that 1) people value most 2) when they want them the most 3) By using the fewest possible ressources

Question 16

2 things Institutions created by the state do

Answer 16

Protect private property and enforce contractual obligations

Question 17

3 groups of decision makers

Answer 17

Consumers, Producers, Government

Question 18

Who makes marginal decisions and what does that mean

Answer 18

Consumers and producers : decide if they will be made better off by buying or selling less of any given product

Question 19

Circular flow of income and expenditure

Answer 19

Individuals (consumers) and firms producers. On goods market, ind. pay firms for goods and services in exchange of goods and services. In factor market (3 factors of production), indiv. sell their factor markets to firms in exchange of payment for factor services.

Question 20

2 characteristics of production and who noted them

Answer 20

specialization and division of labour. Adam Smith

Question 21

What is specialization

Answer 21

Allocation of different jobs to different people

Question 22

What is self-sufficiency

Answer 22

One person does the job

Question 23

Why specialization is better than self-sufficiency (2 reasons)

Answer 23

1) Comparative advantage (individual abilities differ)

2) Learning by doing (focusing on one activity leads to improvements

Question 24

What is divison of labour

Answer 24

Extension of the idea of specialization for the production of a single good or service (travail à la chaîne)

Question 25

Specialization must be accompagnied by what

Answer 25

Trade

Question 26

What is barter

Answer 26

troc

Question 27

How money eliminates cumbersome system of barter

Answer 27

seperates transactions involved in the exchange of products, so facilitates specialization and trade

Question 28

what facilitated globalization

Answer 28

rapid reduction of transportation and communication costs in last half of 20th century

Question 29

What economic attitude is to abandon if you want to take part in global economy as a country

Answer 29

isolationist economic stance (stance = attitude)

Question 30

Three pure types of economic systems.

Answer 30

Traditional (marchés), Command, Free-market

Question 31

what is a mixed economy. what economies are mixed

Answer 31

economy that combines significant elements of all 3 pure economic systems. all economies are mixed

Question 32

what is a free-market economy (2 things)

Answer 32

1) prices and for goods and services are determined by laws and forces of supply/demand and 2) Free of government intervention, monopoly or other autority

Question 33

Problem discussed by Karl Marx

Answer 33

free-market economies can’t be relied on to generate a just distribution of output

Question 34

What Karl Marx supported

Answer 34

Centrally planned system (économie dirigée) ->benefits according to him

Question 35

What did Marx’s ideas lead to

Answer 35

adoption of socialist/communist systems by many countries

Question 36

Problem that socialist/communist countries had (noticed in end of 20th century)

Answer 36

Unability to provide their citizens the rising living standards that existed in the more free-market economies

Question 37

What happened to communist/socialist countries in last 2 decades of 20th century

Answer 37

Most governments replaced their systems of central planning with much freer markets

Question 38

What failure of centrally planned economies does not demonstrate and what it does demonstrate

Answer 38

DOES NOT demonstrate superiority of completely free-market economies.
DOES demonstrate superiority of mixed economies with large elements of free-market

Question 39

What are the key government-provided institutions in market economies

Answer 39

Private property and freedom of contract

Question 40

3 other things government intervene in in modern mixed economies

Answer 40

1) correct market failures (concurrence illégale)
2) Provide public goods
3) Offset the effect of externalities

Question 41

Do markets work badly w/o gvt intervention

Answer 41

No. work well but sometimes gvt policy improves outcome for society as a whole