Back to Basics
The PPC won't let me be
Absolutely True!
Marginalize Me?
I can't get no satisfaction!
Who Dun It?
100
Economics is the study of __________________
Resource allocation in an scarce environment; others possible (choices in scarcity, etc.)
100
What are the 4 factors of production?
Labor, Land, Capital, Entrepreneurship
100
Agree or disagree and explain. "Trade patterns are determined by absolute advantage".
DISAGREE; trade patterns are based on the principle of comparative advantage, NOT absolute advantage.
100
What do we call it when we evaluate small changes to a plan of action?
MARGINAL analysis.
100
What exactly is utility, and what type of unit is it measured in?
Utility is a measure of value or usefulness as perceived by the consumer and it is measured in UTILS.
100
This person is considered the "Father of Economics"
Adam Smith
200
What 3 questions must all economies answer?
What GOODs to produce, HOW to assemble the resources together, WHO gets them.
200
What can cause economic growth on a PPC? Identify all causes.
An increase in the quantity or quality of labor, land, capital or technology will shift the PPC out; i.e. will result in economic growth.
200
DEFINE absolute advantage and comparative advantage.
Absolute advantage means that with CONSTANT resources a producer can produce more output, whereas comparative advantage means a producer has a LOWER OPPORTUNITY COST of production.
200
A rational actor would continue to take an action until the ___________ benefit is equal to the __________ cost.
Marginal Benefit = Marginal Cost
200
State the UTILITY MAXIMIZING RULE.
MUx/$Px = MUy/$Py
200
This person is famous for recommending government spending as a means to recover from recession/depression.
John Maynard Keynes
300
The minimum wage should be raised is an example of a ___________ statement.
Normative.
300
If a society chooses to produce more consumption goods today vs. producing more capital goods today, explain the impact this choice has on the future PPC.
Although the PPC will shift out due to increased technology, the outward shift will be smaller than it otherwise would have been due to the lower amount of investment in capital goods today.
300
Who has the absolute advantage in wheat? In corn?
Paul has the absolute advantage in both wheat and corn.
300
EXPLAIN using an EXAMPLE what the difference is between explicit and implicit costs.
EXPLICIT costs = money out of your pocket; IMPLICIT = opportunity costs. Take Alyssa on date and pay $50 explicit for meal and implicit costs of not being able to ask her friend out.
300
EXPLAIN how to calculate the TOTAL when given the marginal at different levels of output, AND how you calculate the MARGINAL when given the total at different levels of output.
To calculate the total from the marginal, ADD the marginals together. To calculate the marginal calculate the difference in the total.
300
This person is credited with developing the Principle of Comparative Advantage.
David Ricardo
400
The difference between a tradeoff and an opportunity cost is ___________. EXPLAIN with an example.
The tradeoff is the competing goals or acquisitions, the opportunity cost is incurred ONCE the choice is made.
400
What's the difference between allocative and productive efficiency, AND how do we know where are these points located on a PPC?
Productive efficiency refers to full employment of resources and is located anywhere ON the PPC; allocative efficiency refers to meeting society's needs and we need more information about society's preferences to place it on the PPC.
400
Who has the COMPARATIVE advantage in wheat? State your answer in terms of OPPORTUNITY COST.
Cliff has the comparative advantage in wheat because he has the lower opportunity cost (of 2/3 corn vs. Paul's 5/4 corn)
400
Aaryan consumes products A and B and has spent his budget on these 2 items. He derived 100 utils from the last purchase of product A and 80 utils from the last purchase of product B. Product A costs $2 and product B costs $1. What should Aaryan do next? Explain using marginal analysis.
Aaryan should purchase more of product B because B yields 80 utils per dollar, whereas A yields only 50 utils per dollar.
400
The law of _________ ____________ _________ (3 words) explains why our our satisfaction from successive units of a good decreases.
Diminishing Marginal Utility
400
This person is the current Chairperson of the Fed.
Jerome Powell
500
Explain how the efficiency vs. equity tradeoff applies to: a command economy vs. a market economy?
A command economy trades off efficiency in exchange for equity, whereas a market economy trades off equity for efficiency.
500
Explain WHY some PPCs are straight and some are curved. In your explanation include the ROOT CAUSE of the slope of each.
A straight PPC means that resources are easily adaptable to both products (peas and carrots), whereas a curved PPC indicates specialization of resources (pizzas and cars) and results in increasing opportunity cost.
500
For ONE ICE CREAM how many cones should be exchanged in order to satisfy BOTH Ben AND Jerry?
1 ice cream for 2 cones or 3 cones would work; 1 ice cream for MORE THAN 1.5 cones and LESS THAN 4 cones.
500
What is the latin term for "all else held constant"
ceteris paribus
500
With a $20 budget, what is the optimal consumption for Marcus?
2 snacks and 6 drinks
500
This person is the current Secretary of the Treasury.
Janet Yellen