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ECON 104 > ECON Exam 1 (Module 1-4) > Flashcards

ECON Exam 1 (Module 1-4) Flashcards

1
Q

How do we define economics?

A

the study of people’s choices given scarcity and other constraints

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2
Q

What are the two primary types of constraints?

A

Scarcity & Institutions

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3
Q

What is Scarcity?

A

The situation in which resources are limited relative to wants and needs

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4
Q

What is the economic force?

A

The reaction to scarcity. And or - The need to make choices about how scarce resources are used.

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5
Q

What predictions did Thomas Malthus make?

A
  • Predicts that population grows
  • As population grows more resources are used (they are scare)
  • Population grows until we reach a steady state (constant)
  • If surplus continues, population continues to grow.
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6
Q

What is epistemology?

A

“How we know what we know” - the theory of knowledge.

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7
Q

What does the term empirical mean?

A

Utilizes various methods to analyze economic theory or test hypotheses using real-world data.

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8
Q

What is Positive Sum

A

where the sum total of gains (gains of both parties added together) is positive

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9
Q

What is Zero Sum Game

A

a finite quantity of resources where one player’s loss equals another player’s gain

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10
Q

What are the Central Coordination Problems

A

All Three
What and how much to produce? (What and how much of an activity to do?)
How to produce it? (What resources, institutions, and technologies are used in the activity?)
For whom to produce it? (decide the distribution of the outcomes)

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11
Q

Examples of What/How much to produce?

A

if Rita has a piece of land, she needs to think about what crop she should produce on her land. She can only grow either Jowar or wheat. Given that land is limited, she needs to choose whether she wants to use the land to produce Jowar or wheat or both.

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12
Q

Why are central coordination problems important to the field of economics?

A

They help to explain the challenges of coordinating economic activity among various groups in society.

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13
Q

What are the prototypical ways of answering the central coordination problems in a market based economy for firms?

A

Price of goods and services

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14
Q

What are Private goods w example.

A

More Rivalrous and More Excludable
- Like food, cloths, Personal electronics

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15
Q

What are Institutions?

A

Constraints like law, government, customs, norms, traditions.

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16
Q

What are Club goods? (W Examples)

A

Country Clubs, Cable TV, Subscriptions

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17
Q

What are Commons goods

A

Fish, Public waterways, Road systems

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18
Q

Public goods

A

Law enforcement, Public schools, Beaches

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19
Q

What are externalities

A

Negative - products and services that give negative effects on consumers and society
Positive - products and services that give positive effects on consumers and society

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20
Q

What is an agent?

A

An individual or group making economic decisions with specific objectives in mind.

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21
Q

What is emergent order?

A

Emergent order suggests that coordination can arise from the interactions of numerous agents making independent choices in response to their surroundings.

22
Q

What is a Nash Equilibrium?

A

Refers to a state where no participating agents can improve their outcomes by changing their actions.

23
Q

What is a model?

A

A tool to make sense of complex systems by Simplifying Assumptions

24
Q

Why are models wrong?

A

Models are always wrong because they are simplifications of complex ideas.
- they will never capture all the details of the real world.

25
Q

Why are models still useful?

A

By removing complexity and extraneous information, you are left with clearer pictures of the most important factors in a system.

  • removing complexity makes the model much more manageable, modifiable, and ultimately useful.
26
Q

What do self interest mean in economics

A

Anything done for seeking personal gain

27
Q

What do Rationality mean in economics

A

that consumers will act to maximize self-interest and businesses will act to maximize profits

28
Q

What do More is better mean in economics

A

Means that for economic goods, consumers always receive some happiness from more

29
Q

What is the economic decision rule?

A

If the additional benefit of making a decision exceeds the additional cost, then the individual should make that decision.

30
Q

What is marginal analysis?

A

Compare the additional benefit to the additional costs.

31
Q

What does the term marginal mean when used in economics?

A

small change or an additional amount.

32
Q

What is marginal benefit?

A

Marginal benefit is the maximum amount a consumer will pay for one additional good or service.

33
Q

what is marginal cost?

A

the change in cost for making one additional good or incremental unit of service.

34
Q

Given the MBs and MCs could you find the optimal quantity?

A

Yes, the optimal choice is when the marginal benefit is equal to the marginal cost.

35
Q

Define opportunity cost

A

The benefit forgone of the next best alternative

36
Q

Why is it irrational to engage in an activity where marginal cost exceeds marginal benefit, according to the text?

A

Such an activity results in a net loss of economic value.

37
Q

What is the production possibilities model?

A

is an introductory tool for thinking about society’s response to scarcity

38
Q

How do you calculate opportunity cost given a production possibilities table?

A

The ratio of what is given up to receive that good

39
Q

How is opportunity cost related to the slope of the production possibilities frontier (curve)?

A

The slope of the PPF indicates the opportunity cost of producing one good versus the other good

40
Q

What is comparative advantage?

A

when something (resource, country, business, person, etc.) can engage in an activity (production) at a lower opportunity cost than others.

41
Q

What is comparative advantage based on?

A

This is the basis of trade as trading according to comparative allows for society to produce goods and services at a lower average opportunity cost.

42
Q

What is increasing marginal opportunity cost

A

the amount of a good that has to be sacrificed for each additional unit of the other good

43
Q

How does one know that a point inside the frontier is “inefficient”?

A

Its inefficient because the total output of commodities is below the output capacity

44
Q

What is deduction?

A

a type of reasoning that involves moving from general principles to a specific conclusion

45
Q

What is induction?

A

a type of reasoning that involves moving from specific observations to a general conclusion.

46
Q

What is abduction?

A

a form of reasoning that allows us to form hypotheses and make predictions based on observation

47
Q

What is the Art of Economics?

A

combines positive and normative economics to try to understand how best to bring about a particular outcome

48
Q

What does endogenous mean?

A

(from within the model.) A change is one that occurs because the agents of the model make new choices

49
Q

What does exogenous mean?

A

(from outside of the model.) A exogenous change is imposed on the model and its agents, it is something that necessitates change

50
Q

What does law of demand mean?

A

there is an inverse relationship between price and quantity demanded

51
Q

What does law of supply?

A

direct relation between price and quantity

52
Q

What are the assumptions? (name 3)

A

No product differentiation

Many buyers and sellers

Buyers and sellers are price takers

Good information

No barriers to entry or exit.

ECON 104 (1 decks)

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