Vocab
What is Scarcity?
Resources are limited but wants are unlimited
What is labor?
Workers
What is Accounting Profit?
The money earned after subtracting all IMPLICIT costs
What is Micro Economics?
A part of economics that focuses on the descisions on a smaller scale with limited resources.
What is Cost-Benefit Analysis?
Comparing the cost of buying or producing to the benefit
Give 2 examples of capital.
Answers may vary. Ex. Tools, Machinery, Factories, etc.
John quits his job as an electrician making $2000 a week. If John sells 10 bikes for $400 a bike, and the cost of each bike is $100. What is his economic profit?
$1000 ($400-$100=$300 $300x10=$3000 $3000-$2000=$1000)
What is Opportunity Cost?
The value of the next best alternative when making a choice
What is Resource Allocation?
How society decides how to use resources
What is an entrepreneur?
People who start businesses or bring a product to the market.
What is Economic Profit?
The profit made when taking BOTH implicit and explicit cost into account
Name 3 types of Economies.
Traditional, Command/Planned, Free Market, or Mixed Economy.
What is the Production Possibilities Curve (PPC)?
A model that shows the trade-offs between producing different goods or services
What are the FOUR factors of production?
Land, labor, capital, and entreprenuership
David loves to make pizzas. Right now, David works as a professional chef, making $176,000 a year. If David decides to quit and start working at Domino's he will make $36,000 a year. Assume David starts working at Domino's, what is his opportunity cost?
A loss of $140,000 a year
How can a country consume beyond its PRESENT PPF?
Trade with other countries allowing them to take advantage of different opportunity costs.
What is Comparative Advantage?
The idea that a firm can benefit more from producing a single product instead of multiple products
Who owns capital in a market economy?
Private citizens
Mary owns a bakery. In 1 hour, she can make 12 cookies. It costs $1 to make each cookie and she can sell each cookie for $4. She could make 5 muffins in an hour and sell muffins for $5 a piece. The cost to make each muffin is $2. What is her accounting profit if she continues to make cookies?
$36 per hour
A point lying on the PPC Curve is
A) unattainable and productively efficient
B) attainable and productively efficient
C) productively efficient
B) attainable and productively efficient