econ final elzenga section 2

Question 1

Invisible Hand Theorem

Answer 1

when the quantity supplied is greater than the quantity demanded, price has a tendency to fall; converse also exists

Question 2

Efficiency

Answer 2

achieving a goal as cheaply as possible

Question 3

Economic Institutions

Answer 3

laws, common practices, and organizations in a society (Including corporate, government, and cultural norms)

Question 4

Economic Policies

Answer 4

actions (or inaction) taken by government to influence economic actions

Question 5

Positive Economics

Answer 5

the study of what is, and how the economy works; lots of theory

Question 6

Normative Economics

Answer 6

the study of what the goals of the economy should be

Question 7

Production Possibility Curve

Answer 7

a curve measuring the maximum combination of outputs that can be obtained from a given number of inputs; visual image of the tradeoff between the cost of one good in terms of another

Question 8

PPC demonstrates

Answer 8

There is a limit to what you can achieve, given the existing institutions, resources, and technology; Every choice you make has an opportunity cost. You can get more of something only by giving up something else

Question 9

Increasing Marginal Opportunity Cost

Answer 9

opportunity costs increase the more you concentrate on the activity; in order to get more of something, generally one must give up ever-increasing quantities of something else

Question 10

Comparative Advantage

Answer 10

better suited to the production of one good than to the production of another good

Question 11

Points inside the PPC

Answer 11

represent inefficiency

Question 12

Production Possibility Curve Shift Outward

Answer 12

increase in inputs or the productivity of inputs

Question 13

Points on the PPC

Answer 13

represent efficiency

Question 14

Points outside of the PPC

Answer 14

are not obtainable

Question 15

Productive Efficiency

Answer 15

achieving as much output as possible from a given amount of inputs and resources

Question 16

Inefficiency

Answer 16

getting less output from inputs that, if devoted to some other activity, would produce more output

Question 17

Efficiency

Answer 17

achieving a goal using as few inputs as possible

Question 18

Laissez-faire

Answer 18

an economic policy of leaving coordination of individuals’ actions to the market; translates to leave things alone

Question 19

Effects of globalization on firms:

Answer 19

(Positive) since the world is larger than the domestic, the potential rewards are much greater; (Negative) it is much harder to compete in a global market

Question 20

Law of One Price

Answer 20

the wages of workers in one country will not differ significantly from the wages of (equal) workers in another institutionally similar country

Question 21

Institutions

Answer 21

the formal and informal rules that constrain human economic behavior

Question 22

Market Economy

Answer 22

an economic system based on private property and the market in which, in principle, individuals decide how, what, and for whom to produce

Question 23

Socialism

Answer 23

an economic system based on individuals’ goodwill towards others, not on their own self-interest, and in which, in principle, society decides what, how, and for whom to produce

Question 24

Capitalism

Answer 24

an economic system based on the market in which the means of production resides with a small group of individuals called capitalists