Econ chapter 1 and 2

What can't be illustrated by using production possibilities frontier

Allocative efficiency

Q0 stands for

An old amount of action

TB0 stands for

An old total benefit

TC0 stands for

An old total cost

Basic circular flow model

Assumes that there are 2 economic agents household and firms and 2 market product and factor market

Consider a society facing the production possibilities frontiers in the figure shown. Out of the options provided, which is the most likely cause of a society moving from PPF1 to PPF2?

Better printing press technology

Scarce resource for firms

Capital Labor Natural resources

Rational people make a decision by

Comparing the marginal benefit and cost

Allocative efficiency occurs when

Consumers obtain products that maximize their own utility

opportunity cost(OC)

Cost of the next best alternative use of money, time, or resources when one choice is made rather than another

production possibilities frontier is a

Curve that shows the maximum attainable combinations of 2 outputs that can be produced given resources and technology

Two things a modeler can change if the model rejects the hypothesis

Data and assumptions

Consider a society facing the production possibilities frontiers in the figure shown. Out of the options provided, which is the most likely cause of a society moving from PPF3 to PPF1?

Death of workers due to COVID19

If MB (marginal benefit) is greater than MC(marginal cost)

Do more of action to increase net benefit (total benefit - total cost)

if MB(marginal benefit) is less than MC(marginal cost)

Do you less of action to increase net benefit

Simplification makes us focus on

Essentials of complex reality and useful answers to the economic problems

an example of incentive

Extra credit Bonus check

Scarcity for firms resources

Factors of production such as labor natural resources and capital

The PPF model can illustrate

Five basic economic concepts- scarcity, trade-offs opportunity cost efficiency and economic growth

Trade-off

Giving up one thing for another

Microeconomics topics

How households and firms make decisions How households and firms interact in the market How the government influences decisions Of households and firms

TC1 stands for

Is a new total cost

Government restrictions on booming industry

Is not a way for economics growth

opportunity cost

Is the value of the second best option given up to choose the best option a quantitive measure of a trade off relationship

What is an economic model?

It is a simplified version of some aspect of economic life used to analyze an economic issue.

Which of the following is not a characteristic of a good economic model?

It replicates closely a complex reality with much details.

If MB(Marginal benefit) Is equal to MC(marginal cost)

Keep level of action as it is since it is maximizing the net benefit

not a scarce resource for firms?

Knowledge

How do individuals maximize their utility

Labor given time

A negative incentive will make people

Less likely to do something by raising cost or lowering profit and one of its examples is a(n) grade reduction on late submission

2 fields in economics

Macro and Micro

What are the steps of developing an economic model

Make reasonable assumptions 's formulate a testable hypothesis test your hypothesis through data collection Test hypothesis through data collection revise the model by changing assumptions or data of both use the revised model to explain or predict economic events

MB stands for

Marginal benefit

Example of Econ in business or companies

Maximize profit from selling goods or services Maximize profit from buying factors of production given amount of factors of production

Government

Maximize the well being for the society

Example of Econ in governments

Maximize the well-being of the society individuals and firms given budget

Consumers

Maximize their utility

Example of Econ in Individuals (households)

Maximize utility from consuming products given income Maximize utility from providing working hours given time.

if marginal benefit is greater than marginal cost People will do

More action to increase net benefit

Consider a society facing the production possibilities frontiers in the figure shown. Out of the options provided, which is the most likely cause of a society moving from PPF1 to PPF3?

More workers

NB stands for

Net benefit

Q1 stands for

New amount of action

TB1 stands for

New total benefit

Efficiency

Occurs when people make decisions to reach the highest goals given scarce We cannot anyone better off without making someone else worse off

Scarcity

Peoples wants being greater than available sources

Consider the production possibilities frontier displayed in the figure shown. Which points are efficient and attainable with existing resources?

Points I and IV

Consider the production possibilities frontier displayed in the figure shown. Which of the following statements is currently true?

Producing at point II is impossible.

Any points on a production possibilities frontier are

Productively efficient becasue products are made at the minimum cost and a trade-off on those points always occurs.

productive efficiency occurs when

Products are produced at the minimum cost

Which occurs when our resources are limited despite our wants

Scarcity

Any points above a production possibility frontier are impossible to reach due to

Scarcity of resources and are called infeasible points.

Lily is thinking about going to the amusement park. She needs to pay the entrance fee of $25 and parking fee of $5 a day to enter the amusement park. Each ride in the amusement park costs $10. She is willing to pay $15 for the first ride but is willing to pay $10 for the second ride. She will take up to the _________ ride because at that ride, her marginal cost and marginal benefit are equal to each other at $_________.

Second; 10

What is a good economic model?

Stay it's assumption clearly and reasonably, predict causing affect, describe real life data

Which of the following statement is a normative statement?

The rent is too cheap in Fairfield, CA.

What is economics?

The study of how people manage resources given resources to achieve their goal

Macroeconomics

The study of the economy as a whole

Scarcity for individuals resources

Time and income

TB stands for

Total benefit

Which occurs when people choose one option by giving up alternatives

Trade off

Macroeconomics variables

Unemployment Total output Inflation

Individuals want to maximize

Utility

What is the number one question you ask when looking at scarcity

What are the wants in constraints of those involved

When are people rational

When they make decisions to achieve their highest goals given scarce resources and available information

Incentive

a reason for doing something, benefit and cost gain

An economic model is

a simplified representation of real economics phenomenon

productive efficiency

a situation in which a good or service is produced at the lowest possible cost

economic growth

an increase in the amount of goods and services produced per head of the population over a period of time.

How can marginal cost be measured

by the number of the other good given up to produce one more of one good or a slope of a PPF at each point and can be used to compare those opportunity costs among products.

Why is a concave more realistic than a linear PPF in that all of its resources have different efficiency

it has an increasing opportunity cost.

positive incentive

makes people more likely to do something by lowering their opportunity cost

rational behavior

making choices to achieve goals in the most effective way possible

MC stands for

marginal cost

Firms

maximize profits

What does PPF stand for

production possibilities frontier

Causes of economic growth

resources, technology, and institutions

allocative efficiency

the particular mix of goods and services most highly valued by society

Microeconomics

the study of how households and firms make decisions and how they interact in markets

scarce resources we value

time, money, labor, tools, land, and raw materials—exist in limited supply.

TC stands for

total cost

Refer to a table above that shows the units of courses, total benefit, and total cost for Matthew to answer the following questions. Units Total Benefit(TB, $) Total Cost(TC, $) 3 150 138 6 294 276 9 432 414 12 564 552 15 690 690 Matthew will take ________ units of courses to maximize his net benefit because at those units, his marginal benefit is _____________ the marginal cost.

9: Equal to

What is PPF

A Curve that shows maximum attainable combinations of two goods or services that can be produced giving resources and technology

negative incentive

A penalty that discourages a behavior (e.g., library fine, parking ticket).

What is the MB equation

(TB1-TB0)/(Q1-Q0)

What is the MC equation

(TC1-TC0)/(Q1-Q0)

Consider the production possibilities frontier displayed in the figure shown. The (marginal or unit) opportunity cost of a bushel of apple is __________watermelons and the total opportunity cost of moving from D to A is ___________ bushels of apples.

0.05: 300

Two Types of PPF

1. Linear PPF 2. Concave PPF

Three economic assumptions

1. People are rational 2. People respond to incentives 3. People make marginal decisions

Three ways to have economic growth

1.More resources such as Labor capital natural resources and in entrepreneurship 2. Technological advancements or positive technological change 3. Specializations and trade

Suppose that Matthew is taking 6 units right now. His marginal benefit is $48, which is calculated by (294-150)(6-3), and his marginal cost is $__________. As a result, he will take ____ units because his marginal benefit is higher than marginal cost.

46: More

Consider the production possibilities frontier displayed in the figure shown. The opportunity cost of one watermelon is:

20 bushels of apples

Suppose that Matthew is taking 12 units right now. His marginal benefit is $___________ and his marginal cost is $46, which is calculated by (552-414)/(12-9). As a result, he will take _______ units.

44: Fewer