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Econ Midterm 1 > Chapters 2&3 > Flashcards

Chapters 2&3 Flashcards

(88 cards)

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1
Q

The ___ of an action is the value of the next best alternative that must be foregone in order to undertake the activity.

A

opportunity cost

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2
Q

The opportunity cost of an action is the value of the next best ___.

A

alternative

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3
Q

As you produce more of a good, the opportunity cost of producing that good ___.

A

increases

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4
Q

The PPC is bowed ___.

A

outward

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5
Q

The ___ states that in expanding the production of a good, employ the resources with the lowest opportunity cost first.

A

Principle of Increasing Opportunity Cost

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6
Q

The Principle of Increasing Opportunity cost is also called the ____ principle.

A

low-hanging fruit

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7
Q

Increases in ___ and improvements in ___ or ____ affect the PPC.

A

productive resources

knowledge or technology

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8
Q

A person has ___ in the production of a good if the opportunity cost of producing that good is lower than for anyone else.

A

comparative advantage

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9
Q

The __ states that everyone does the best when each person specializes on the activities for which his or her opportunity cost is the lowest.

A

Principle of Comparative Advantage

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10
Q

___ means self-sufficiency, no interaction.

A

Autarky

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11
Q

A person has a(n) ___ in the production of a good if he/she can produce more of that good than anyone else, using the same resources.

A

absolute advantage

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12
Q

As with individuals, nations can benefit from __ and __

A

specialization

exchange

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13
Q

The Principle of Comparative Advantage implies that ___ will increase the total value of goods and services.

A

free trade

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14
Q

The ___ aims to deepen economic ties between its 12 participating nations.

A

Trans-Pacific Partnership

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15
Q

The Trans-Pacific Partnership lowers ____ and fosters ___ to boost growth.

A

tariffs

trade

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16
Q

The Trans-Pacific Partnership also fosters a closer relationship on __- and ____.

A

economic policies

regulation

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17
Q

The Three Big Questions of Supply and Demand include:

  2. 3.
A
  1. What goods and services should be produced?
  2. How should we produce them?
  3. Who should get them?
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18
Q

___ are where you have one governing body that makes decisions.

A

Command economies

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19
Q

___ are where everything is done by consensus and cooperation.

A

Cooperative economies

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20
Q

___ entail very little government regulation.

A

Individualistic economies

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21
Q

The major actors of economies are __ and ___.

A

firms

households/consumers

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22
Q

___ are any organization that transform inputs into outputs.

A

Firms

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23
Q

___ are the consuming units of an economy.

A

Households/consumers

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24
Q

The Law of Demand states that when all else is equal, the higher the price of a good, the ____ the quantity is demanded.

A

lower

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25
Demand has a __ slope.
negative
26
The ___ entails the change in the quantity demanded of a good that results from buyers using other goods when its price changes.
substitution effect
27
The ___ entails the change in the quantity demanded of a good that results from the reduction in purchasing power when the price of a good increases.
income effect
28
A ____ is the largest dollar amount a buyer would be willing to pay for a good or service.
buyer's reservation price
29
Reservation prices may very depending on the person-to-person, and depending on ___.
quantity consumed
30
When the market price is ___, fewer consumers will have reservation prices that are high enough to justify the purchase of the good or service.
high
31
The buyer's reservation price explains why demand curves are ____.
downward sloping
32
Change in demand entails a change in the entire relationship between ___ and ____.
price | quantity demanded
33
An increase in demand means that the quantity demanded is higher ___.
at every price
34
A ____ means that the quantity demanded is lower at every price.
decrease in demand
35
(Factors that increase demand) 1. An increased ____ for the good or service.
preference
36
(Factors that increase demand) 2. An increase in ___.
income
37
When income increases, ___ are consumed more.
normal goods
38
(Factors that increase demand) 3. A decrease in ___.
income
39
When income decreases, ___ are consumed more.
inferior
40
(Factors that increase demand) 4. A ___ in the price of a complementary good or service.
decrease
41
(Factors that increase demand) 5. An ___ in the price of a substitute good or service.
increase
42
(Factors that increase demand) 6. An increase in __.
population
43
(Factors that increase demand) 7. An increase in ___.
future prices
44
___ entails the amount that producers supply at a particular price.
Quantity supplied
45
___ is a point on a supply curve.
Quantity supplied
46
___ is the entire relationship between price and the quantity supplied.
Supply
47
The __ states that all else equal, the higher the price of a good, the higher the quantity supplied of it.
Law of Supply
48
A ___ is the smallest dollar amount for which a seller would be willing to sell an additional unit of a good or service.
seller's reservation price
49
___ measures how much it costs sellers to produce another unit.
Seller's reservation price
50
Reservation prices may very between sellers, and depending on _____.
how much of a good or service has been produced
51
The ___ measures the cost to producers of producing an additional unit of a good or service.
marginal seller's reservation price
52
The ___ shows the price at which there will be a buyer who drops out of the market.
marginal buyer's reservation price
53
The ___ interpretation states that at a given price, the demand curve shows quantity demanded.
Horizontal
54
The ___ interpretation states that at a given quantity, the demand curve shows the marginal buyer's reservation price.
vertical
55
The ___ interpretation states that at a given quantity, the supply shows the marginal seller's reservation price.
vertical
56
The __ interpretation states that at a given price, the supply curve shows the quantity supplied.
horizontal
57
__ is the change in the entire relationship between price and quantity supplied.
Change in supply
58
An ___ means that the quantity supplied is higher at every price.
increase in supply
59
(Factors that increase supply) 1. A ___ in the price of inputs used in the production process.
reduction
60
Inputs in the production process include __, ___, and ___.
land labor capital
61
(Factors that increase supply) 2. An improvement in __ that reduces production costs.
technology
62
(Factors that increase supply) 3. An improvement in __.
weather
63
(Factors that increase supply) 4. An ___ in the number of suppliers.
increase
64
(Factors that increase supply) 5. A ___ decrease in expected future prices.
decrease
65
In ___, price equates the quantity supplied and demanded.
market equilibrium
66
___ is the price at which quantity supplied equals quantity demanded.
Equilibrium price (P*)
67
___ is the quantity bought and sold at the equilibrium price.
Equilibrium quantity (Q*)
68
If supply and demand move in the same direction (both increase/decrease), you can make definite predictions about ___, but not ___.
quantity | price
69
If supply and demand move in opposite directions (one increases and the other decreases), you can make definite predictions about ___, but not __.
price | quantity
70
Even though we can't see supply and demand curves, they help us make predictions about how price and quantity will respond to various __.
economic shocks
71
In order to determine if the market produces the socially optimal quantity of a good, find the ___.
total economic surplus
72
In order to determine if markets produce too little or too much of a given good or service, find the __.
total economic surplus
73
In order to determine if market equilibrium is the right quantity, find the ___.
total economic surplus
74
___ is the difference between the buyer's reservation price for a product and the price actually paid.
consumer surplus
75
Consumer surplus equation:
BRP - P*
76
___ is the difference between a price a seller receives for a product and the seller's reservation price.
Producer surplus
77
Producer surplus equation
P* - SRV
78
___ is the quantity of a good that results in the maximum possible economic surplus from producing and consuming the good.
Socially optimal quantity
79
___ occurs when goods and services are produced at their socially optimal levels.
Efficiency
80
(Market Equilibrium isn't socially optimal when..) Consumption or production entails __ to people other than buyers.
benefits
81
(Market Equilibrium isn't socially optimal when..) Consumption or production entails costs not borne by ___.
sellers
82
(Market Equilibrium isn't socially optimal when..) If supply and demand curves do not reflect all costs and benefits associated with __ and __-.
production | consumption
83
If supply and demand curves reflect all costs and benefits associated with production and consumption, ____ are efficient.
perfectly competitive
84
Foreign-born workers and native-born do not always possess the same __.
skill set
85
Foreign-born workers and native-born workers can be thought of as different __.
factors of production
86
If immigration leads firms to ___ output, they will need more inputs (workers).
expand
87
|slope| = opportunity cost of the good on the ___ axis.
horizontal
88
1/|slope| = opportunity cost of the good on the ___ axis.
vertical

Econ Midterm 1 (2 decks)

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