Econ 202 exam 1

Capatalism can be a dynamic economic system when it combines

-Private incentives for cost-reducing innovation -Firms led by those with proven ability to produce goods at low cost -Public policy supporting these conditions -A stable society, environment and resource base.

Where capitalism is less dynamic

-Private property is not secure: There is weak enforcement of the rule of law and of contracts, or expropriation either by criminal elements or by government bodies. -Markets are not competitive -Firms are owned and managed by people who survive because of their connections to government or their privileged birth:

Two key ideas of Malthus model

-The law of diminishing average product of labour -Population expands if living standards increase

Marginal rate of substitution

-the trade-off that a person is willing to make between two goods. -slope of the indifference curve. (trade-off that Alexei is willing to make between final grade and free time.)

Utility

A numerical indicator of the value that one places on an outcome, such that higher valued outcomes will be chosen over lower valued ones when both are feasible.

comparitive advantage

A person or country has comparative advantage in the production of a particular good, if the cost of producing an additional unit of that good relative to the cost of producing another good is lower than another person or country's cost to produce the same two goods.

Absolute advantage

A person or country has this in the production of a good if the inputs it uses to produce this good are less than in some other person or country.

If the growth rate of the GDP per capita is constant what will the line of the graph look like on a ratio scale graph

An upward sloping straight line

If the GDP per capita increases by a greater and greater amount in absolute terms over time, consistent with a positive constant growth rate, what will the linear scale curve look like on a graph?

An upward-sloping convex curve

Anil has just won the lottery and has received 10,000 rupees. He is considering how much (if at all) he would like to share this sum with his friend Bala. Before he manages to share his winnings, Anil receives a tax bill for these winnings of 3,000 rupees. Based on this information, which of the following statements is true?

Anil will be on a lower indifference curve after the tax bill

Which of the following are examples of markets? Wartime food rationing, auction websites like ebay, touts selling tickets outside of ticket halls, sale of illegal arms

Auction websites like ebay, touts selling tickets outside of ticket halls, sale of illegal arms

The marginal product and average product are approximately the same for the initial hour.

Because there are no previous hours to consider, the average product for the initial hour is just the improvement produced by a single hour, which in turn approximates to the marginal product from 0 to 1 hours (the precise marginal product changes over this interval, reflected in the decreasing slope of the production function).

Private property

Can be owned by an individual, a family, a business, or some entity other than the government.

Cost as a function

Cost=(𝑤age×workers)+(price of a tonne of coal* number of coal tonnes)

Which of the following variables have followed the so-called 'hockey-stick' trajectory—that is, little to no growth for most of history followed by a sudden and sharp change to a positive growth rate? GDP per capita, labour productivity, inequality, atmospheric CO2

GDP per capita, labour productivity, atm CO2

Indifference curves slope downward due to trade-offs:

If you are indifferent between two combinations, the combination that has more of one good must have less of the other good.

In a constrained choice problem the solution will choose based on what?

MRS=MRT (marginal rate of substitution= marginal rate of transformation)

How could capitalism lead to growth in living standards?

Technology and specialization

Feasible frontier

The curve made of points that defines the maximum feasible quantity of one good for a given quantity of the other. (the highest grade he can achieve given the amount of free time he takes.)

Economic rent

The extra profit that a successful innovator makes on bringing a new product to the market before its competitors.

Average product

Total output divided by a particular input, for example per worker (divided by the number of workers) or per worker per hour (total output divided by the total number of hours of labour put in).

dynamic economy

an economy bringing sustained growth in living standards and is constantly changing

economic rent

benefit minus its economic cost (out-of-pocket plus opportunity costs)

Marginal rate of transformation

benefit minus its economic cost (out-of-pocket plus opportunity costs) (the rate at which Alexei can transform free time into grade points.)

Which of the following are examples of private property? computers belonging to your college, a farmers land in soviet russia, shares in a company, a workers skills

computers belonging to your college, shares in a company,

Higher indifference curves correspond to

higher utility levels

Malthus said what about living standards and technology

improvements in technology could not raise living standards was also based on a mode

A striking characteristic of firms, distinguishing them from families and governments,

is how quickly they can be born, expand, contract and die

The budget constraint is a feasible frontier with a constant marginal rate of transformation

its slope is constant so the MRT is constant

budget constraint

shows what you can affoard to buy 𝑐=𝑤(24−𝑡)

In a simultaneous one shot game a player chooses an action taking into account what?

the possible actions that other players can take

How to find average product

the slope

How to find marginal product

the slope of the tangent

Preferences

the things you care about

Indifference curve

which joins together all of the combinations that provide equal utility or 'satisfaction'.