Unit 1 Flashcards
scarcity is a problem that will eventually disappear as technology advances
False
if it costs sinclair $300 to produce 3 suede jackets and $420 to produce 4 suede jackets, then the difference of $120 is the marginal cost of producing the 4th suede jacket.
True
Suppose the extra cost for a doctor to keep his office open for one extra hour is $200. Then, the doctor should stay open for the extra hour even if he can generate additional revenue of $200 for that hour.
True
positive analysis is concerned with “what out to be”, while normative analysis is concerned with “what is”
False
explain the economic assumption that “people are rational”
People are rational means that economists assume consumers and firms will use all available information as they act to achieve their goals. Rational individuals weigh the benefits and costs of each action and they choose an action only if the benefits exceed the costs.
what is meant by the statement that “optimal decisions are made at the margin”?
in ecomics, the word marginal means extra or additional. Economists reason that the optimal decision is to continue any activity up to the point where the marginal benefits equals the marginal costs, so optimal decisions are made at the point where the extra benefit recieved form an activity is equal to the extra cost associated with that activity.
what is equity and how does it differ from efficiency?
equity refers to the fair distribution of economic benefits. In eco, efficiency refers to least cost production (productive efficiency) and producing according to human preferences (allocative efficiency)..
define productive efficiency. Does productive efficiency imply allocative efficiency? Explain.
productive effiency is an effiencicy criterion that described a situation in which goods and services are produced at the lowest possile cost. It does not imply allocative effiency which is a criterion associated with product goods and services that consumers value most. For example, a manufacturer may be able to product typewriters at the lowest possible cost of say, $200 but this does not necessarily mean that consumers are willing to pay $200 for a type writer.
what is the difference between positive economic analysis and normative economic analysis? give one example each of positive and normative economic issue or question or statement.
positive economic analysis is concerned with what is. Normative economic analysis reaches conclusions on what ought to be.
ex. the company is in debt
the company should have a better financial team
list the five main factors of production
labor capital human capital natural resources entrepreneurial ability
explain the difference between a firms revenue and its profit
a firms revenue is the total amount received for selling a good or service. a firms profit is the difference between the revenue and its costs
which of the following statements best describes scarcity
scarcity is a situation where unlimted wants exceed limited recources
under which of the categories below is the idea that people use all available information as they achieve their goals?
people are rational
which sort of thinking goes on in the mind of a hungry economist who has decided to satisfy his hunger by eating potato chips
the economist will stop after each additional chip is consumed and examine the benefit and cost of that potato chip before continuing on to the next one.
which of the following is not among the fundamental econmic questions that every society must solve?
what goods and services will be exchanged?
Throughout most of the 20th century, which of the following was the most important centrally planned economy in the world?
the soviet union
find the best ending to the following sentence: a market economy is an economy in which decisions of households and firms interacting in the markets determine
the allocation of economic resources
which of the following is acheived when a good or service is produced up to the point where the marginal benefit to consumers is equal to the marginal cost of producing it?
allocative effiency
which of the following best decribes the characteristics of models used in econmics?
models are simplifications of reality that include only essential elements and exclude less relevant details
which of the following questions can be answered using normative economic reasoning
should the college charge lower tuition to smart students?
the difference between microeconomics and macro is mainly a difference between
the study of household and firm behavior versus the study of the economy as a whole
which figure involves a single variable
all
which of the following is a graph showing the relationship between two variables?
the graph on the left. Price and quanity
refer to the graph below. what is the absolute value of the slope of this line.
one fifth
refer to the graph below. the shift from demand curve 1 to demand curve 2 occurs because
the determinant of demand other than the price of the good has changed
refer to the figure below. what can be said about the value of the slope of this curve?
the value of the slope is greater between points g and h than between ponits i and j
let V1 equal a value in period one, and v2 equal a value in period 2. what is the rate of growth between period 1 and 2
v2-v1/v1 x 100
