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ECON.101 > final exam review > Flashcards

final exam review Flashcards

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1
Q

what is microeconomics?

A

study of resource allocation of individuals, firms, and markets

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1
Q

what is scarcity and trade-offs?

A

limited resources lead to opportunity costs and choices

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2
Q

what is value?

A

value is subjective and based on individual preferences and trade-offs

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3
Q

what are the two big questions?

A
  1. what, how and for whom?
  2. self-interest vs social interest
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4
Q

what does what, how and for whom mean?

A

determines how resources are allocated

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5
Q

what does self-interest vs social interest mean?

A

balancing personal and societal benefits

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6
Q

what is a positive statement?

A

objective, fact based

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7
Q

what is a normative statement?

A

subjective, opinion-based

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8
Q

what is the production possibilities frontier (PPF)?

A

shows tradeoffs, opportunity costs and efficiency in production

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9
Q

what is opportunity cost?

A

the next best alternative forgone

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10
Q

what is marginal benefit?

A

the extra benefit to consumers from consuming one more unit of a good (the highest price a consumer would pay for an additional unit)

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11
Q

what is marginal cost?

A

the cost of producing one more unit of a good (the change in total production costs from producing one additional unit)

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12
Q

what is allocative efficiency?

A

achieved when MB = MC

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13
Q

what is economic growth?

A

PPF shifts outward due to better tech/resources

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14
Q

what is the impact of specialization and trade?

A

increases productivity via comparative advantage

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15
Q

what is absolute advantage?

A

the ability to produce more/better goods/services than a competitor with the same/less resources

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16
Q

what is comparative advantage?

A

the ability to produce goods and services at a lower opportunity cost than a competitor

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17
Q

describe a demand curve?

A

downward sloping; as price rises, quantity demanded falls

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18
Q

what causes movement along the demand curve?

A

price changes

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19
Q

what causes a shift of the demand curve?

A

non-price factors like income or preferences

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20
Q

describe a supply curve

A

upward sloping; as price rises, quantity supplied decreases

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21
Q

what is market equilibrium?

A

where quantity demanded = quantity supplied

22
Q

what causes change in equilibrium?

A

shift of the supply or demand curve

23
Q

what is price elasticity of demand (PED)?

A

measures demand sensitivity to price changes

24
Q

how to calculate PED?

A

= % change in quantity demanded / % change in price

25
Q

what does it mean if demand is elastic?

A

price increase decreases revenue

26
Q

what does it mean if demand is inelastic?

A

price increase raises revenue

27
Q

what is cross elasticity?

A

measures demand responsiveness to price changes of another good

28
Q

what is income elasticity?

A

measures demand response to income changes

29
Q

what is elasticity of supply?

A

measures supply responsiveness to price changes

30
Q

what is consumer surplus?

A

demand exceeds supply

31
Q

what is producer surplus?

A

supply exceeds demand (market is saturated)

32
Q

what is deadweight loss?

A

loss in total surplus due to inefficiencies (eg. taxes)

33
Q

what is allocative efficiency?

A

maximized when total surplus is highest

34
Q

what is utilitarianism?

A

maximizes total happiness by ensuring the quality of life of the least fortunate in society

35
Q

what is fairness?

A

ensuring equal outcomes

36
Q

what is a price ceiling?

A

a maximum price set by the government (eg. rent control), that can lead to supply shortages

37
Q

what is a price floor?

A

a minimum price set by the government (minimum wage) can lead to supply surpluses

38
Q

what is the impact of taxes?

A

cause deadweight loss and raise government revenue

39
Q

what is a production quota?

A

limit on supply (eg. milk quota)

40
Q

how to calculate deadweight loss?

A

area between supply and demand curves representing lost welfare

41
Q

what is the impact of tariffs?

A

reduce trade, raise prices, and create inefficiencies

42
Q

what are the protectionism arguments FOR tariffs?

A

protects infant industries, national security and jobs

43
Q

what are the protectionism arguments AGAINST tariffs?

A

leads to inefficiency and higher prices

44
Q

what are fixed costs?

A

they don’t change with output

45
Q

what are variable costs?

A

change with output

46
Q

describe a cost curve graph?

A

u-shaped; marginal cost intersects average total cost at its minimum

47
Q

what are perfect competition assumptions?

A

many firms, identical products, free entry and exit

48
Q

what is profit maximization?

A

occurs where price = marginal cost

49
Q

what is the shutdown rule?

A

operate if P > AVC, shut down if P < AVC

50
Q

what does perfect competition look like in the long run?

A

zero economic profit due to free market entry/exit

51
Q

what are barriers to entry?

A

prevent competition (eg. patents, high startup costs)

52
Q

monopoly vs perfect competition

A

monopolies result in higher prices, lower output and inefficiency

53
Q
A

ECON.101 (2 decks)

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