exam 1: chapter one Flashcards
What is an incentive?
Rewards and incentives that motivate behavior.
What is the outcome of public and private interest aligning?
Good for all.
How can one regulate incentives to benefit the good?
They can regulate taxes, subsides, and other incentives.
What is scarcity?
The lack of a thing to satisfy our wants.
What is the consequence of trade-offs?
Scarcity.
What are opportunity costs?
The value of the choice not taken.
What is an example of an opportunity cost?
- The value of attending college vs. Working.
- By not going to college you miss the chance to:
1. ) earn a degree that will likely lead to a higher salary.
2. ) make life long connections.
3. ) Gain a more well rounded skill set. - By going to college you miss the opportunity:
1. ) start making money.
2. ) earning debt.
3. ) understanding how the real world works.
What is thinking on margin?
Thinking in terms of marginal costs and benefits.
( should I slightly speed to make it to the destination slightly quicker and chance a ticket; or do I drive the speed limit and not risk the possibility of getting a ticket.)
What are the advantages of specialization?
Specialization allows one to maximize their efficiency.
A specialization with low opportunity costs allows one to ?
Trade and take a mutual advantage.
T/F Booms and busts are normal outcomes of changing economic conditions?
True.
What causes inflation?
An increase in the money supply .
What does in inflation itself cause?
It causes the currency in that area to lose its value and things to generally increase in price.
Profit?
when it costs you less to build something than it does to sell.
Loss?
Spending more on the production than what you are bringing in.
What is an absolute advantage?
Book: If a country in production can produce that same goods using fewer inputs.
What is comparative advantage?
Weighing the opportunity costs and drawbacks before deciding how to distribute your time.
What is the production potential graph?
It is the graph that has each item produced on an axis.
- The total number of products produced goes on each respective axis and a straight-line is drawn between them.
What are the factors of production?
- Land
- Labor
- Capital
- Entrepreneurship.
Comparative Advantage Thoery?
in order for a country to be rich, they should manufacture goods that cost less and purchase goods that cost a lot to produce.
Powerpoint: When people or nations specialize in goods that have a low opportunity cost, they can trade to mutual advantage.
What is an incentive to read your economics textbook?
A.) The title of your book.
B.) The time it takes you to read a chapter.
C.) Better grades in economics.
C.) Better grades in economics.
- That is the expected reward for reading the text.
Give the example of Trade-Offs Using Drugs?
- More testing means fewer side effects, better product quality, and in general a safer/greater experience for all.
- But with every good thing comes a trade-off.
- Drug Lag: people are harmed when approval of a safe drug is delayed.
- Drug Loss: higher testing costs may mean a safe drug is never developed.
What is the great economic problem?
How to arrange our resources to satisfy as many wants as possible.
What are all the benefits of trade?
- ) increased production through specialization.
2. ) Take advantage of our economic scale.
How is the institution involved in the matter of nation satisfaction?
Institutions provide varying incentives to save and invest in:
- physical capital
- Human capital
- Innovation
- Efficient organization.
Provide an example of thinking on margin.
If you have a quantity of 20 units, and each unit costs $5 to produce, then you have spent $120 on creating your inventory.
- But your revenue is only $100.
- So you think about making a 21st unit, because the new price to produce it is 4$.
- You can still sell your product for 5$.
- so now the overall Q: 21 units & the price spent: $124.
- but your new revenue is 124$.
A line on the PPF, that touches from your comparative advantage product to a point further than the max production of your other point is?
Tradeline.
