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- author "KM"
- tags "Macro Exam 1"
- description ""
- fileName "Macro Economics"
- freezingBlueDBID -1.0
- Define scarcity
- Limited resources for unlimited wants
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What does an entrepreneur do
Combines labor, land, and capital to produce goods
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What will the market naturally hit
Equillibrium point- supply meets demand?
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What are economic goods
Scarce goods from scarce resources
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What is an economy
Total sum of product and service transactions of value between two agents in a region
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What are trade offs
What am I giving up to get something
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Define opportunity cost
- X dollars, nets X goods
- Low hanging fruit easier than top of the tree, diminished returns from resource precurement
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Define marginal cost
What does it cost to get X more goods
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What is the production possibility frontier
I can produce X of those or X of these, or a smaller quantity of both
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Where does productive efficiency fall on a graph
- Anywhere on curve due to cost of procurement
- Inside of curve is inefficient
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What is the rule of rational choice
To prosper people alter behavior if the marginal benefit out weighs marginal cost
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What are net benefits
Sum of gain after subtracting loss
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What is optimal level
- Getting the most good for the least
- Bad?
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At What point does the opportunity cost outweigh the op benefit?
Effect marg benifit vs effect marg cost [E(MB) vs E(MC)]
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What is positive incentive
Increase benefit or reduce cost
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What is negative incentive
Reduce benifit or increase cost
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What is specializing/specialization
- Limit expenditures by limiting diversity thus reducing entrance and production costs
- Via trading too
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What is comparative advantage
- Producing goods or services at a lower opportunity cost than other goods or services
- Offered by specialization
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What is allocative efficiency
- Partitioning resources to optimize production and reach production possibility forntier
- Where marginal cost and marginal benefit meet(?)
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What is marginal benefit
- Your return for your expenditures
- What you are willing to give for a result
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Why does market failure happen
Economy doesn't efficiently allocate resources independently
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Define equality
How much the economy can produce effeciently vs how it's distributed
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Define allocation
- What good to make
- How to make it
- Who will get it
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Is correlation equal to causation?
NO
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Affect of positive or negative loss?
It does or doesn't cause problems with aggregation
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What is fallacy of composition
What is true for one doesn't mean true for all
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Is it how do people behave or how should people behave
How DO people behave
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What is positive analysis
- Object, value
- Free approach
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What are normative statements
Involve subjective judgements
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What causes a majority of disagreements?
Normative prescribes, more than positive describes (?)
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What is economics
Study of using our resources for wants and desires
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What forces us to choose?
Scarcity
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What is the economic problem
Scarcity forces us to choose between what wants and needs we have the resources to acquire
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What is rational behavior
People do the best they can, based on values and info, under current and estimated circumstances
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What is theory
Explanation that accounts for known facts or phenomena
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Define abstract
Distance from simplification
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Define empiracal
Fits in a repeatable and meaningful way with the data
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Understanding economics requires facts to be selected and arranged in a...
Conceptual order
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What is ceteris paribus
- Letting everything else be equal
- Holding everything else constant
- Allows the abstraction of relevant facts from otherwise complex situations that would require a story to frame the facts
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What does human behavior make harder?
Observation
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Why are generalizations that allow predictions harder in social science?
Because of human behavioral variables
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What behavior is easier to predict and why?
Group behavior is easier to predict than individual because more general spread of specific personal variable
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Define micro
Decision making of orgs or households
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Define macro
Aggregate (total) economy as they influence society
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When is it labor intensive
Large labor
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When is it captial intensive
Large capital
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What is a product market
Buyers of goods
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What is a factor or input market
People sell their labor, land, capital, and entrep
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What is the circular flow?
Us to Business, Business to Us, etc.
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Bads
Opposite of goods,items we dont desire or want
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Consumer soveeignty
Voting with your money
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Command economy
Goverment plans everything
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Market economy
Markets plans itself
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Mixed economy
Government and market plan the market
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Optimal level (correct)
Getting the most good for the keast bad
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Supply and demand
Price goes up as quantity goes down and vice versa equilibirum acheived by natural market correction
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Production efficiency
When the marginal cost of goods is less than their marginal benefit, efficiency of effort, making too much costs too much without giving the same value
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Positive statement
Describes
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Normative statement
Prescribes
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