Week 1

Question 1

• What is Economics? Why is it important?
• Difference between Microeconomics and Macroeconomics
• How Economists Use Theories and Models to Understand Economic Issues
• How Economies can be Organized: Overview of Economic Systems

Question 2

What do Economists call it when we don’t have all the data we need to make a perfect decision?

Answer 2

Imperfect data

Question 3

Why is the internet affecting the economics of a society?

Answer 3

Because of the speed that information disseminates through the populace.

Question 4

Why is studying economics important to you?

Question 5

What is the relationship between production and division of labor?

Question 6

Why is scarcity significant?

Question 7

What do you call the study of how humans make decisions in the environment of scarcity?

Answer 7

Economics!

Question 8

What do you call it when the desire for good, services or resources exceeds what is available?

Answer 8

Scarcity

Question 9

What does scarcity force us to do?

Answer 9

Make decisions. Sometimes, difficult decisions.

Question 10

Who first proposed the idea of “The division and specialization of labor”?

Answer 10

Adam Smith in his book, The Wealth of Nations

Question 11

What is the primary concept of “division of labor”?

Answer 11

You produce a good or service by dividing it into a number of tasks that different workers perform, instead of all being done by one person.

Question 12

How is the “division of labor” concept used within a business?

Answer 12

Different employee tiers, or any range of jobs within a business is using this concept.

Question 13

What is the primary purpose, and theory behind, dividing tasks?

Answer 13

To produce a greater quantity of output

Question 14

What is the observation that Led Smith to this concept?

Answer 14

A factory of 10 people, who each made a pin separately would produce 200 pins. A factory of 10 people with divided task could produce 48,000 pins. An increase of 24,000%

Question 15

What is the name for a particular small job that allows workers to focus on a part of the production process where they have an advantage?

Answer 15

Specialization

Question 16

What are some of the benefits of “Specialization”?

Answer 16

Effectiveness, efficiency, and Economies of scale

Question 17

What is the definition of the term “Core Competency”

Answer 17

when a business focuses on one or very few products and is more successful that average in that area.

Question 18

What is the definition of the term “economies of scale”?

Answer 18

When the level of production increases, the average cost of producing each individual unit declines

Question 19

What is the ultimate result of workers who can focus on their preferences and talents, and learn to do specialized jobs better?

Answer 19

They can work in larger organizations and the society as a whole can produce and consume far more than if each person tried to produce all of their own goods and services.

Question 20

What concept is essentially a force acting against the problem of scarcity?

Answer 20

The division and specialization of labor.

Question 21

Why does increased specialization require increased trade?

Answer 21

Since the specialized worker produces less on their own, they have to trade more to acquire the goods they need.

Question 22

Specialization only makes sense if…

Answer 22

workers can use the pay they receive from their jobs, to purchase other goods and services they need.

Question 23

The study that focuses on the actions of individual agents within an economy, like households, workers and businesses is called…

Answer 23

Microeconomics

Question 24

The study that looks at the economy as a whole, and focuses on broad issues such as production growth, unemployment, inflation, government deficits and import/export levels is called…

Answer 24

Macroeconomics

Question 25

Who was it that pointed out economics is not just a subject area, but also a way of thinking?

Answer 25

John Maynard Keynes

Question 26

What do you call a simplified representation of how two or more variables interact with eachother?

Answer 26

A theory

Question 27

What is the alternate word for “theory”?

Answer 27

model

Question 28

What is the least amount of ways that society organizes an economy?

Answer 28

3 ways minimum

Question 29

Which is the oldest economic system in use today?

Answer 29

The traditional economy, where occupations stay in the family and what you produce is what you consume. Little economic progress or development with this system.

Question 30

What economy is devoted to goals passed down from a ruler or ruling class?

Answer 30

Command economy. Think ancient Egypt, or China, Cuba and North Korea. Governemtn decides what goods and services will be produced and the prices it charges for them.

Question 31

What economy is decentralized?

Answer 31

Market economy - where groups of buyers and sellers come together and make decisions independently. Based on private enterprise. Private individuals own and operate production (resources and businesses). Market forces, not governments, determine economic decisions.

Question 32

What is Marginal Analysis

Answer 32

examining the benefits and costs of choosing a little more or a little less of a good

Question 33

What is the other name for Marginal Analysis

Answer 33

Change Analysis

Question 34

Define the “utility” of a good or service

Answer 34

the satisfaction received from consumption. This is relative to each person and can very depending on how much is consumed

Question 35

What is the name for decreased utility per unit, as the number of units increases?

Answer 35

Law of diminishing marginal utility

Question 36

What law explains why people and societies rearely make all-or-nothing choices?

Answer 36

The law of diminishing marginal utility

Question 37

Why is it important to frame opportunity costs about what could have been, instead of what it costs?

Answer 37

$5 a day may not sound like a lot day to day, but at $1250 it could mean a vacation.

Question 38

What is the name for costs that were incurred which cannot be recovered

Answer 38

?