Unit 1 Econ

Question 1

Microeconomics

Answer 1

Focuses on individual decision-making units and how they interact

Question 2

Macroeconomics

Answer 2

Explores the economy as a whole

Question 3

Opportunity cost

Answer 3

The cost of choosing; what you give up by choosing one option

Question 4

Endowment

Answer 4

Natural and human resources from which all goods and services must be produced
-finite, but not fixed (scarcity)

Question 5

Utility

Answer 5

Satisfaction; economists assume maximizing this drives individual choice; measured in utils

Question 6

Profit motive

Answer 6

The tendency of people to engage in activities that will lead to monetary gain.

Question 7

Consumer sovereignty

Answer 7

The economic power of the individual in a free market

Question 8

Government regulation

Answer 8

Requirements the government places on private firms and individuals to achieve the government’s goals

Question 9

Social & economic goals

Answer 9

Freedom
Security
Equity
Growth
Efficiency
Stability

Question 10

Marginal Utility

Answer 10

Additional increment of utility associated with consuming one more unit of a good or service

Question 11

Margin

Answer 11

In a succession of units, the specific unit you are focusing on

Question 12

Total Utility

Answer 12

The total satisfaction derived from consuming a specific quantity of a good or service; the total of marginal utilities for all individual units consumed

Question 13

Initial decision

Answer 13

Over-simplified decision-making process based on utility (consume until marginal utility =0)
Bliss point-maximization of utility

Question 14

Scarcity

Answer 14

The fixed amount of goods or services available

Question 15

Traditional economy

Answer 15

An economic system in which traditions, customs, and beliefs help shape the goods and services the economy produces, as well as the rule and manner of their distribution also referred to as a subsistence economy, a traditional economy is defined by bartering and trading

Question 16

Command economy

Answer 16

An economic system in which the means of production are publicly owned and economic activity is directed by a central government or portion of the government

Question 17

Market economy

Answer 17

An economic system in which the forces of supply and demand determine what goods and services are produced

Question 18

Mixed economy

Answer 18

An economy which practices characteristics of both command and market economies; supply and demand largely influence the economy, but there is government intervention to meet certain economic goals

Question 19

Goods

Answer 19

Objects that can fulfill human wants/needs, provide utility

Question 20

Services

Answer 20

Economic activity that is intangible; provides utility, but cannot be stored

Question 21

Satiate

Answer 21

Satisfy

Question 22

Bliss point

Answer 22

Maximization of Utility

Question 23

Marginal analysis

Answer 23

Evaluating the impact of one additional unit

Question 24

Util

Answer 24

A measure of utility (this is an abstract concept)

Question 25

Diminishing marginal productivity

Answer 25

Initially, one input increases the initial successive units of input toward the output, but eventually this will add to less output

Question 26

Balancing at the margin

Answer 26

Maximizing utility in light of scarcity

Question 27

Discounting the future

Answer 27

Utility diminishes the further in the future that utility is realized

Question 28

Oligopoly

Answer 28

a market characterized by a small number of firms who realize they are interdependent in their pricing and output policies

Question 29

Monopoly

Answer 29

power of being the only seller

Question 30

Monopsony

Answer 30

power of being the only buyer; not a price taker

Question 31

Risk

Answer 31

anything that affects the outcome of your choices that can associated with a probability

Question 32

Risk perception

Answer 32

how our experiences (socialization, advertising, etc.) impact how we value risk

Question 33

Specialization

Answer 33

individuals dividing up labor within/across trades

Question 34

Division of labor

Answer 34

increases productivity as individuals are better able to become more dexterous when they focus on one task

Question 35

Absolute advantage

Answer 35

what an individual/nation is absolutely better at

Question 36

Comparative advantage

Answer 36

the ability to produce a good at a lower opportunity cost that the person or country one trades with

Question 37

Unjust outcomes

Answer 37

unfair outcomes due to inequality of the implementation of rules

Question 38

Assumptions

Answer 38

an abstraction that simplifies a scenario

Question 39

Strong assumptions

Answer 39

unrealistic assumptions (weak assumptions are more realistic); to relax assumptions we go from strong to weak assumptions

Question 40

Consumption

Answer 40

the act of deriving utility (sometimes using things, but only with goods)

Question 41

Constrained Optimization Problem

Answer 41

a situation where one maximizes utility in the face of scarcity

Question 42

Commutative justice

Answer 42

fairness of the rules by which the “market game” is played

Question 43

Commodity money

Answer 43

items that function as money but are also valuable themselves

Question 44

Fiat money

Answer 44

items not valuable as a commodity but function as money because a government states that they are usable for debts

Question 45

Supply

Answer 45

(S) the quantity supplied at certain prices; different than quantity