Midterm Econ 101

Question 1

What is the Command Economy?

Answer 1

The government decides what goods and services are produced at what price and also sets wages.

Question 1

What is the traditional Economy?

Answer 1

What you produce, you consume

Question 2

What is a Market Economy?

Answer 2

Decision-making is decentralized; it is based on private enterprise.

Question 3

What is Specialization?

Answer 3

When workers or firms focus on particular tasks for which they are well suited within the overall process.

Question 4

Why do countries like specializations?

Answer 4

Because they can produce the most of one good an benefit more in doing so.

Question 5

Micro Econ

Answer 5

It focuses in actions within the economy be individuals.

Question 6

Macro Econ.

Answer 6

It focuses in broad issues like inflation and unemplotyment.

Question 7

Difference between Micro/Macro

Answer 7

Individual/broad econ issues

Question 8

PPF

Answer 8

A diagram that shows max productively efficient combinations of two products that a economy can produce given its resources.

Question 9

Positive Statements Econ

Answer 9

Based on facts that can be proven or disproven.

Question 10

Negative Statements

Answer 10

It describes bad economic conditions

Question 11

Law of Diminishing Returns

Answer 11

As we consume more of a good or service, the utility we get from more additional units becomes less satisfying.

Question 12

Absolute advantage

Answer 12

The ability of an entity to produce more and better goods than another entity using the same amount of resources.

Question 13

Demand and Supply Curve-Movement

Answer 13

A “movement along the demand or supply curve” refers to a change in the quantity demanded or supplied of a good solely due to a change in its price, while all other factors affecting demand or supply remain constant; essentially, it means moving up or down the existing curve without the curve itself shifting position.

Question 14

Comparative advantage

Answer 14

Based on the opportunity cost of production. An entity should produce goods with the lowest opportunity cost, even if it doesn’t have the absolute advantage.

Question 15

Demand and Supply Curve Shift

Answer 15

A “shift” in a demand or supply curve represents a change in the quantity demanded or supplied at every price level caused by factors other than the price itself, causing the entire curve to move left or right on the graph.

Question 16

Normal Goods

Answer 16

A good that demand increases when income rises. And demand declines when income declines.

Question 17

Inferior Goods

Answer 17

A good in which quantity declines when income rises. And demand increases when income decreases.

Question 18

Substitute Goods

Answer 18

Are products or services consumers perceive as similar or comparable, allowing them to replace one another when economic conditions change

Question 19

Complement Goods

Answer 19

These goods are often used together so that the consumption of one good tends to be better with the addition of another good. (Peanut butter and Jelly Sandwich).

Question 20

Equilibrium Graph

Answer 20

The point in where Supply and Demand Meet.

Question 21

Elasticity Calculations:
1. Elastic
2. Unitary
3. inelastic

Answer 21

1. %change in quantity / %change in price>1 Elastic
2. %change in quantity / %change in price=1 Unitary
3. %change in quantity / %change in price<1 Inelastic

Question 22

Perfect Competition

Answer 22

Many Firms and Identical Products

Question 23

Types of Cost
1. Explicit Costs
2. Implicit Costs
3. Fixed Cost
4. Variable Cost
5. Total Cost
6. Marginal Cost
7. Average total cost (unit)
8. Average Variable Cost (unit)

Answer 23

1. Out-of-pocket costs actual payments.
2. Opportunity Cost of resources already owned by the firm and used in business.
3. Does not change regardless of production level.
4. Cost increases as production increases and decreases as production decreases.
5. The sum of all fixed and variable costs.
6. The cost by producing one more unit.
7. The total cost to produce each unit.
8. The total variable cost of porducing a certain quantity of goods divided by the quantity produced

7. The sum of the average fixed costs and the average variable costs

Question 23

Monopolistic Competition

Answer 23

Many Firms and similar but not identical products

Question 24

Oligopoly

Answer 24

Few Firms and identical or similar products

Question 25

Monopoly

Answer 25

One firm and no similar products.

Question 26

Economies of Scale

Answer 26

The cost advantages from increasing their output.

Question 26

Long-Run Average Cost (LRAC)

Answer 26

Lowest average cost at which a frim can produce a given level of output in the long run.

Question 26

Short-Run Average Cost (SRAC)

Answer 26

It represents one specific level of fixed costs.

Question 27

MC, AC, AVC, and AFC

Answer 27

Look at the notes *tell me where to look for them.

Question 28

Shutdown Points

Answer 28

The level of output where the marginal cost curve is below the lowest point of the Average Variable cost should be shut down immediately. MR=Price

Question 29

Profit Maximization

Answer 29

If the marginal revenue is above the point where marginal and average costs meet, there is a profit. MR=Price

Question 30

Long-Run

Answer 30

A period of time during which all of a firms inputs are variable.

Question 31

Short-Run

Answer 31

A period of time during which at least one or more of the firms inputs is fixed

Question 32

Total Revenue

Answer 32

Total revenue includes all sources of income, such as:
Sales of goods and services, interest, dividends, rent, donations, and lawsuit proceeds.

Question 33

Total Cost

Answer 33

The sum of all costs a business incurs to produce goods or services.