Chapter 1 - Wheelan

Question 1

Who feeds Paris?

Answer 1

A rhetorical way of drawing attention to the mind-numbing array of things happening every moment of every day to make our modern economy work.

Question 2

Scarcity

Answer 2

finisite supply of everything worth having

Question 3

economy

Answer 3

art of making the most out of life and how do we do that

Question 4

individuals act in a way

Answer 4

to make themselves as well off as possible. Not necessarily mean cash or material goods.

Question 5

maximize utilities

Answer 5

Making oneself as well off as possible. not synonymous with being selfish

Question 6

utility

Answer 6

What makes you better better off in the long run

Question 7

trade off

Answer 7

decision

Question 8

altruistic decision

Answer 8

selfless decisions, try to make the best decision given the available information

Question 9

important decisions

Answer 9

involve balancing value of consumption now vs consumption in the future

Question 10

how do we maximize utility?

Answer 10

by weighting the cost and benefits of everything we do

Question 11

opportunity cost

Answer 11

real cost of something is what you give up in order to get it. The second best alternative

Question 12

when price drops

Answer 12

demand increases

Question 13

most scarce resource

Answer 13

time

Question 14

firm

Answer 14

for profit business. anything from a guy selling hot dog to a corporation. or a non profit

Question 15

firms decide

Answer 15

price of production, goods to sell, and how to produce them

Question 16

market economy directs resources

Answer 16

to their most productive use

Question 17

barriers

Answer 17

prevent new businesses from entering a market, not matter how profitable widgets may be

Question 18

barriers can be

Answer 18

physical or natural ex: seasons, patents, regulations, politics, etc

Question 19

firms control production

Answer 19

raise profits by lowering cost of production

Question 20

guide principal

Answer 20

who is going to make the firm most profitable in the long run?

Question 21

puppy in window?

Answer 21

market price - supply/demand.

Question 22

price discrimination

Answer 22

selling items at different prices to different individuals ex: airlines - pleasure vs. business

Question 23

individuals

Answer 23

try to make themselves as well off as possible

Question 24

firms

Answer 24

try to maximize profits

Question 25

market economy

Answer 25

powerful source trying to make our lives better by delivering the goods we want to buy

Question 26

market is

Answer 26

amoral. rewards winners and punishes losers

Question 27

amoral

Answer 27

no relation to value

Question 28

diamond water paradox

Answer 28

not vital to our existence yet cost is high bc of scaricity

Question 29

market provides

Answer 29

goods we want to buy

Question 30

prices are a way

Answer 30

to allocate scarce resources

Question 31

what is the function of an economic system?

Answer 31

to decide who gets what - people who are willing to pay the most

Question 32

capitalism and communism

both ration goods how?

Answer 32

capitalism - with price

communism - making people wait in line

Question 33

most markets are self-correcting

Answer 33

we allocate price and value to goods

Question 34

we make good decisions when…

Answer 34

we compare prices

Question 35

if we fix prices in a market system….

Answer 35

private firms will find another way to compete

Question 36

EVERY market transaction makes

Answer 36

all parties better off

Question 37

both firms and consumers act…

Answer 37

in their best interest

Question 38

rationality assumption

Answer 38

humans act consistently in ways that make themselves as better off as possible

Question 39

an individual is not better off if

Answer 39

if theyre denying themselves of some option

Question 40

you optimize if at margin

Answer 40

benefit = cost

Question 41

cost is higher than benefit

Answer 41

we don’t buy it

Question 42

cost is lower than benefit

Answer 42

we buy it

Question 43

pricing products

Answer 43

cognitive and emotional sense

Question 44

behavioral economics

Answer 44

marriage between psychology and economics

Question 45

life is not fair

Answer 45

market is to economy what economy is to democracy. a decent flawed choice among many alternatives

Question 46

markets are consistent with views of individual liberty

Answer 46

preference. cannot tell us what to do

Question 47

markets will allocate scarce goods and often fail

Answer 47

monopoly, public goods, and income inequality.