exam 1: chapter one

Question 1

What is an incentive?

Answer 1

Rewards and incentives that motivate behavior.

Question 2

What is the outcome of public and private interest aligning?

Answer 2

Good for all.

Question 3

How can one regulate incentives to benefit the good?

Answer 3

They can regulate taxes, subsides, and other incentives.

Question 4

What is scarcity?

Answer 4

The lack of a thing to satisfy our wants.

Question 5

What is the consequence of trade-offs?

Answer 5

Scarcity.

Question 6

What are opportunity costs?

Answer 6

The value of the choice not taken.

Question 7

What is an example of an opportunity cost?

Answer 7

• 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.

Question 8

What is thinking on margin?

Answer 8

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.)

Question 9

What are the advantages of specialization?

Answer 9

Specialization allows one to maximize their efficiency.

Question 10

A specialization with low opportunity costs allows one to ?

Answer 10

Trade and take a mutual advantage.

Question 11

T/F Booms and busts are normal outcomes of changing economic conditions?

Answer 11

True.

Question 12

What causes inflation?

Answer 12

An increase in the money supply .

Question 13

What does in inflation itself cause?

Answer 13

It causes the currency in that area to lose its value and things to generally increase in price.

Question 14

Profit?

Answer 14

when it costs you less to build something than it does to sell.

Question 15

Loss?

Answer 15

Spending more on the production than what you are bringing in.

Question 16

What is an absolute advantage?

Answer 16

Book: If a country in production can produce that same goods using fewer inputs.

Question 17

What is comparative advantage?

Answer 17

Weighing the opportunity costs and drawbacks before deciding how to distribute your time.

Question 18

What is the production potential graph?

Answer 18

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.

Question 19

What are the factors of production?

Answer 19

• Land
• Labor
• Capital
• Entrepreneurship.

Question 20

Comparative Advantage Thoery?

Answer 20

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.

Question 21

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.

Answer 21

C.) Better grades in economics.

- That is the expected reward for reading the text.

Question 22

Give the example of Trade-Offs Using Drugs?

Answer 22

• 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.

Question 23

What is the great economic problem?

Answer 23

How to arrange our resources to satisfy as many wants as possible.

Question 24

What are all the benefits of trade?

Answer 24

1. ) increased production through specialization.

2. ) Take advantage of our economic scale.

Question 25

How is the institution involved in the matter of nation satisfaction?

Answer 25

Institutions provide varying incentives to save and invest in:

• physical capital
• Human capital
• Innovation
• Efficient organization.

Question 26

Provide an example of thinking on margin.

Answer 26

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: $124.
• but your new revenue is 124$.

Question 27

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?

Answer 27

Tradeline.