Man Ec: #6

Question 1

The price system coordinates a capitalistic market by answering three basic questions…

Answer 1

1) How to produce
2) what to produce
3) whom to produce it for

Question 2

An economy is successful when it is impossible to get more ______ from a given resource.

Answer 2

output

Question 3

Define efficiency

Answer 3

if it is impossible given available resources, to implement an alternative arrangement under which all parties involved are at least as well off.

Question 4

Is there a larger output through the idea of specialization or through self-sufficiency?

Answer 4

through specialization so long as there is something to coordinate things so that the computer programmer can also have food and the farmer can also have a car etc.

Question 5

What system (market, socialistic, communistic, etc) takes the least amount of information to be efficient?

Answer 5

the market economy because all someone needs to know is local information and system wide prices.

Question 6

Production efficiency is looked at as the first thing needed in moving toward a efficient market. (rather than product mix or exchange efficiency) What is product efficiency?

Answer 6

looks at economy from the perspective of inputs into the production process.

Question 7

Isoquant means?

Answer 7

shows all the possible combinations of inputs such as capital (k) and labor (l) that yield the SAME output

Question 8

Isocost lines are?

Answer 8

lines drawn in a graph relating units of labor to units of capital as well

Question 9

The slope of a isoquant is in the terms of change in captial / change in labor. This slope is called the marginal rate of technical substitution of labor for capital. Say this in other words.

Answer 9

This means when one less unit of labor is used there must be some amount of capital added, and vice versa.

Question 10

total cost for an isocost line can be written as C=wL+rK. What does this mean?

Answer 10

cost=price of laborlabor+cost of capitalcapital

Question 11

An isocost line is bounded by the given cost outlay (or budget essentially) TO find the most efficient production you must find where the isocost line and the isoquant _________

Answer 11

intersect. This means that at that certain budget, that the isocost will tangent an esoquant based on a certain quantity which is bounded by the isocost because of the given budget (cost outlay)