CORE 1 : Capitalism

Question 1

What represents the hockey stick?

Answer 1

The evolution of measurable components of quality of life.

Question 2

Def of production function

Answer 2

Function mapping physical inputs (K,L) to output.
f(K,L)
K = quantity of capital
L = quantity of labour

Question 3

Def of productivity

Answer 3

Efficency of the physical inputs in producing the output.

Question 4

How is called f, the production function ?

Answer 4

Technology

Question 5

Def of the utility function

Answer 5

A function mapping the satisfaction of a person to goods they consume.

Question 6

How are called the parameters of the utility function ?

Answer 6

Preferences

Question 7

How is the value of the utility?

Answer 7

Absolutly meaningless

Question 8

For the utility function, how economists consider individuals?

Answer 8

Utility maximizers

Question 9

Is utility function only about goods?

Answer 9

Nope, you cram anything in it.

Question 10

How are called all the parameters of an economics problem (utilities, production function…)?

Answer 10

The state of nature

Question 11

Def feasible set

Answer 11

Any combination of products which it is possible to produce.

Question 12

Def frontier of production

Answer 12

All the combinations of goods produced such that the increase in production in one good requires to forgo some production in the other good.

Question 13

Def indifference curves

Answer 13

All combination of goods that provide the same amount of utility.

Question 14

Def optimum

Answer 14

The optimum is the feasible production providing the highest utility.

Question 15

Def markets

Answer 15

A means of tranferring goods or services from one person to another.

Question 16

Examples of non-market transferts

Answer 16

Gift
Theft
Political order

Question 17

Absolute advantage

Answer 17

Ability to produce more goods than other producers for a given amount of resources.

Question 18

Comparative advantage

Answer 18

Ability to produce a good at lower opportunity cost than other producers.

Question 19

The equilibrium depends on what?

Answer 19

Bargaining power

Question 20

To what leads trading?

Answer 20

Trade is always beneficial to both parties.
Trading allows to consume quantities beyond the production frontier.
Trade leads to specialization.
Trading increases the overall output.

Question 21

Why specialization increases productivity of labour?

Answer 21

• learning by doing
• taking advantage of natural differences in skill and talent
• economies of scale

Question 22

What is the condition to specialize?

Answer 22

Have a way to acquire the goods we need. Possible thanks to the markets in the capitalist society.

Question 23

What is the organisation of work today and back then?

Answer 23

Firms/Families

Question 24

What are the main differences btw the firms and families organisations of labour?

Answer 24

The creation
Growth
Production capped or not

Question 25

Def firms

Answer 25

Economic organisations in which private owners of capital goods hire direct labour to produce goods and services for sale on markets to make a profit.

Question 26

To what the existence of a firm is tied?

Answer 26

The labour market.
Supply side: workers
Demand side: firms

Question 27

What are the caracteristics of the owner?

Answer 27

Owns the capital.
Directs the workers.
Receive the profits.
Suffers the losses.

Question 28

What are the caracteristics of the employee?

Answer 28

Follows the orders.
Receives a regular wage.
Can be dismissed.

Question 29

What are the caracteristics of the market?

Answer 29

Set the prices and the quantities bought from the firm.
Depends on competition among firms.

Question 30

Def institutions

Answer 30

Encompasses society’s formal (laws,rules…), informal rules (norms of behavior, conventions, self imposed codes of conduct) and the enforcement of these rules.

Question 31

What institutions influence?

Answer 31

The markets

Question 32

GDP =

Answer 32

Aggregate output