Econ 302 Exam1

  1. What is economics?
    it is the study of production, distribution and consumption of goods and services. Social science concerned with the use of scarce resources to obtain the maximum satisfaction of the unlimited wants of society. Is concerned with what is and focuses on facts and cause and effect relationshios.
  2. What is macroeconomics?
    The study of measures of economic activity GDP, total income, total output, total imports, total exports, to government expenditures. EX entire auto industry
  3. What is microeconomics?
    is the study of individual units, firms and industries & demographic groups.
  4. What is Morality?
    incorporates value judgements as to what the world should be like
  5. What is GDP Gross Domestic Product?
    The total market value of all final goodsand services produced annually within the boundaries of the US, whether by US or foreign supplied resources.
  6. What is a business cycle?
    Recurring increases and decreases in the level of economic activity over periods of years; consisting of peak, recession, trough and expansion phases.
  7. What is inflation?
    a rise in the general level of prices in an economy
  8. What is fiscal policy?
    Changes in government spending and tax collections designed to achieve full employment and non-inflationary domestic outout; also called discretionary discal policy.
  9. What is monetary policy?
    The manipulation of the money supply and interest rates, usually by the central bank, to offset fluctuations in the business cycle.
  10. What are the 4 factors of production?
    Labor (Quantity & Quality of workforce(health trainng), Land (natural resources (water, forest, temp, zone), Capital (plant and equipment) Infrastructure (roads, dams, bridges, sewers), Entrepreneurial Ability (risk takers)
  11. What are 2 types of efficiencies?
    Allocated efficiency (making goods and services most wanted by the public) & Productive (economic eddiciency(making things at the lowest cost)
  12. What is the production possibilites curve?
    Laws of opportunity/law of increasing opportunity
  13. Economic Theories
    and models are generalizations based on observations of facts
  14. Economic laws
    are not quantivetatively exact but are useful in predicition for control for and adjusting
  15. What is empirical?
    based on experience or observations
  16. What is the fallacy of false cause?
    does the rooster cause the sun to rise? after this therefore because of this
  17. What is fallacy of competition?
    whats true for the individual is not always true for the groups
  18. What is fallacy of division and composition?
    Whats true or good for the group is not always true for the individual
  19. What is demand and supply?
    a setting where buyers and sellers come together.
  20. What is demand?
    A schedule showing the vatious amounts of A product or servies which buyers are willing and able to purchase at each price at each price in a series of prices during a special time period.
  21. Finish sentence: a change in quanitiy demanded can only be changed by
    a change in price
  22. An example of a variable in the study of microeconomics is the
    price of automobiles in Miami
  23. The difference between iron ore deposits and the steel produced from these deposits that is later used to make factory equipment illustrates the difference between
    land and capital
  24. The concept of economic efficiency is primarily concerned with
    obtaining the max output from available resources
  25. The money payments made to owners of land, labor, capital, and entrepreneurial ability are
    rent, wages, interest and profits respectively
  26. If the demad for a normal good (ex steak) shifts to the left, the most likely reason is that
    a consumer incomes have fallen
  27. If consumers are willing to pay a higher price than previously for EACH level of output, we can say that there has occurred
    an increase in demand
  28. If consumers are willing topay a higher price that previously for each level of output, we can say that there has occurred
    an increase in demand
  29. Finish sentence: A change in quanitity suppled can only be change by
    a change in price
  30. A change in supply can be the result of what causes?
    a change in the number of suppliers
  31. What is productivity?
    Output over imput (labor hours)
  32. What are reasons why most economist oppose the min wage?
    Increase unemployment, tends to increase prices (when min wage rises faster than productivity), it tends to encourage illegal immigration, it tends to encourage emmigration, kids drop earlt to take high paying jobs. Europe usually has higher min wages than the US and higher unemployment. Most economists are not rabid about this because we know that when wages rise too high, people are replaced by machines if at all EX: elevator operators, gas station attendants, checkouts
  33. What is the difference of between macro and micro economics?
    Micro is concerned with individual units such as a person, macro examines the economy as a whole or its basic subdivisions or aggregates such as government, household, and business sectors.
  34. What is meant by allocated efficiency and productive efficiency?
    producing at the lowest costs.
  35. Why don't price controls work?
    price controls do not permit the free flow of market forces.
  36. Demand changes occur when?
    number of buyers, taste & preferences, income, expectations, price of related goods,
  37. Supply changes occur?
    Number of suppliers, technology, resource prices, taxes and subsides, expectation/price, PRG (price of related goods), weather
  38. What is marginal costs and benefits?
    marginal analysis - comparisons of marginal benefirs and marginal costs, usually for decision makeing. To economists, "marginal" means "extra" "additions" or a change in.
  39. What are oppurtunity costs and increasing oppurtunity costs?
    Straight line budget constraint with a constant slope indicates constant oppurtunity costs. 1 DVD is 2 books. 1/2 DVD = 1 book
  40. What is capital to economists?
    capital goods includes all manufactured aids used in producing consumer goods and services. All factory, storage, tansportation, and distribution facilities as well as tools and machinery. purchase of capital is a good investment
  41. What are the 4 major economic goals?
    Economic growth, full employment, price stability, balance of trade. (price stability and full employ conflict), (economic growth and full employment complementary)
  42. What are two major tools for influencing (not controlling) the US economy?
    Monetary policy, fiscal policy
  43. What is positive economics?
    Concerned with what is.... focuses on facts and cause and effect relationships. focuses on theory development, and theory testing. avoids value judgements, tries to establish scientific statements based on economic behavior and deals with what the economy is actually like.
  44. What is Normative economics?
    Concerned with what ought to be. incorporates value judgements about what the economy should be like or what particular policy actions should be recommended to achieve a desired goal (policy economics).
  45. What is the Post Hoc Fallacy?
    You must think carefully b4 concluding that because even A precedes even B, A is the cause of B. This kind of faulty reasoning is known as post hoc, ergo propter hoc or AFTER THIS, THEREFORE BECAUSE OF THIS. EX: hire a new coach, team wins???
  46. What is a direct relationship?
    if a figure slopes upward to the right it is a direct relationship (or positive relationship) between income and consumption
  47. What is an inverse relationship?
    Two variables change in two opposite directions. When ticket prices increase, attendance decrease, when tickets decrease, attendance increases.
  48. What is the production possiblities Curve assumptions?
    The curve is a "constraint" because it shows the limit of attainable outputs. Points on the curve are attainable as long as the economy uses all of its avaibable resources. Points insude the curve are attainable but show less total output-less desirable. Points inside curve imply that the economy could have more of both industrial A and B to achieve full employment of its resources. Points outside the curve are unattainable with the current availability of resources and technology.
  49. What is full employment?
    the economy is employing all its available resources.
  50. Fixed resources
    the quanitiy and quality of the factors of production are fixed.
  51. Fixed technology
    the state of technology (the methods used to produce output) is constant
  52. Two goods
    the economy is producting only two goods: pizzas and industrial robots. Pizza symbolizes consummer good (satisfy wants directly), robots symbolize capital goods (satisfy indirectly by making possible more efficient production of consumer goods.
  53. Why does the production possibility curve have the shape it does?
    The curve is bowed out from the origin of the graph. It gives up successively larger amounts to aquire equal increments of something. The slope becomes steeper as it is moved from A to E.
  54. What is the significance of a point on the curve but closer to one axis that the other?
    THe optimal quantity of production is indicated by the point at the axis. One more point would exceed the optimal quanity in excess and not be maginally benefitial of cost.
  55. What is diminishing marginal utility?
    In any specific period a buyer of a product will derive less satisfaction from each successive unit of product consumed.
  56. What is income effect?
    The law of demand in terms of income and substitution can be explained by income effect that indicates that a lower price increases the pruchasing power of a buyers money income. Enabling ability to purchase more of a product.
  57. What is income substitution?
    suggests that at a lower price buyers have the incentive to substitute what is now a less expensive product for similar products that are now relatively more expensive.
  58. What is normal or superior goods? ingerior goods?
    Normal(superior) are products whose demand varies directly with money income. Inferior is whose goods vary inversly with income.
  59. What are substitute, complemetary and unrelated(independant) goods?
    Substitute is an increase/decrease in the price of one will increase/decrease the demand of the other. Complemetary are demanded jointly (cell phone/service). Unrelated goods (independant) not related (butter and golf balls)
  60. What is the equilibrium point, price and quanity?
    Price is the price where the intentions of buyers and sellers match. Qunatity is the quanitity demanded and quality supplied at the equilibrium price in a competive market. Point is graphicaly indicated by the intersection of the supply curve and the demand curve.
  61. What are allocative and productive efficiencies?
    Allocative is the particular mix of goods and serves most highlyy valued by society (min-cost production assumed). Productive is the production of any particular good in the least costly way
  62. What are price ceilings and price floors?
    Ceining sets the max legal price a seller may charge for a product or service. Floor is a minimum price fixed by the government.
  63. What is the rationing fuction of the market system?
    the ability of the competive forces of supply and demand to establish a price at which selling and buying decisions are consistent.
  64. What is allocation of resouces through consumer spending problems?
    a competive market not only rations goods to consumers but also allocates societys resources efficiently to the particular product. Productive and allocative efficiency
  65. What is economic investment?
    in economics, spending for the production and accumulation of capital and additions to inventories (contrasts with financial investment)
  66. What is financial investment?
    The purchase of a financial asset (such as a stock, bond, or mutual fund) or real asset (such as a house, land or factories) or the building of such assets in the expectation of financial gain
  67. What is laussez Faire?
    Capitalism an economic system in which property resources are privately owned andmarkets and prices are used to direct and coordinate economic activites.
  68. What is productivity>
    a measure of average output or real output per unit of input. labor divided byu real output of hours and work
Card Set
Econ 302 Exam1
Econ 302 Exam1