The Basics
Economic Systems
PPC
Comparative Advantage
Cost Benefit &
Marginal Analysis
Marginal Analysis
100
The social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants.
What is Economics
100
In this economic system the government owns all of the resources and answers all of the economic questions.
What is a command or centrally planned economy?
100
This results in a straight PPC and means that the resources needed to produce each good are easily adaptable or substitutable.
What is constant opportunity costs.
100
The producer that can produce the most output OR requires the least amount of inputs (resources) has...
An absolute advantage.
100
Economic Cost is __________________ costs and ___________________ costs.
Explicit and Implicit
200
The 4 Factors of Production
Capital, Entrepreneurship, Land, and Labor
200
The part of the economy that is controlled by the government.
What is the public sector?
200
This is the concept that as you produce more of any good, the opportunity cost (forgone production of another good) will increase.
What is the Law of Increasing Opportunity Cost.
200
If Mike can make 2 surfboards per hour or 10 bikes per hour and Joe can produce 4 surfboards per hour and 12 bikes. What is Joe's opportunity cost for 1 surfboard?
3 bikes
200
Benefit Maximization occurs when
_______ = _______.
MB = MC
300
Any human-made resource that is used to create other goods and services.
What is Physical Capital
300
The concept that society’s goals will be met as individuals seek their own self-interest. Competition and self-interest act in this way to regulate the free market.
What is the Invisible Hand?
300
The Country of Econland produces both cars and computers. Econland is hit with a tsunami which destroys the countries major powerplants. Will this affect their production possibilities curve, and how?
Yes, Econland's PPC with shift inward (to the left) because of the decrease in the quantity of resources.
300
Panama can produce 100 bananas and 50 sugarcane.
Honduras can produce 160 bananas and 40 sugarcane.
What is Panama’s opportunity cost for producing one unit of bananas? What is Honduras’s opportunity cost for producing one unit of sugarcane?
Panama's per unit opportunity cost for one banana is 1/2 sugarcane.
Honduras's per unit opportunity cost for one sugarcane is 4 bananas.
300
What is the formula for the Utility Maximizing Rule?
MUx/Px =MUy/Py
400
The study of small economic units such as individuals, firms, and markets.
What is Microeconomics?
400
The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses.
What is the Resource or Product Market?
400
Oakbrookville produces both pizza and tacos. Suddenly, all of the students decide that pizza is inhumane and they will not longer eat it. Does this shift Oakbrookville's PPC? If so, how?
No, Oakbrookville's PPC will not shift. A change in demand does not shift the PPC; it causes a slide along the curve toward tacos and away from pizza production.
400
Panama can produce 100 bananas and 50 sugarcane.
Honduras can produce 160 bananas and 40 sugarcane.
What would be the mutually beneficial terms of trade? 1 sugarcane for...
Mutually acceptable terms if trade would be 1 sugarcane for any number between 2 and 4 bananas
400
1. B - 4 Pizzas and 2 Pens
2. E - 53 Utils
500
A measure of efficiency that shows the number of outputs per unit of input.
What is productivity?
500
The 3 Economic Questions that every society must answer are.
The Three Economic Questions
What goods and services should be
produced?
How should these goods and services be
produced?
Who consumes these goods and services?
500
What are the 3 PPC Shifters?
1. Change in resource quantity or quality
2. Change in Technology
3. Change in Trade (allows more consumption)
500
Rome can produce 500 units of wine and 400 units of wheat.
Carthage can produce 200 units of wine and 300 units of wheat.
Draw a PPC graph using those production numbers. Which country has the comparative advantage in wheat? Which country should specialize in the production of wine?
Carthage has a comparative advantage in wheat.
Rome will specialize in wine because they have a comparative advantage (lower opportunity cost).
500
The price of shirts is $10 and shorts are $20. If you only had $100, what combination of shirts and shorts would maximize your utility
2 shirts, 4 shorts