Unit 1 - MICRO

Who has to deal with scarcity?

All societies

What is the crucial problem of economics?

Allocating scarce productive resources to satisfy wants

If you decide to quit your job and instead join a local club sports team, which of the following would be your opportunity cost(s)? A.) Money spent on uniform for your job B.) Forgone income from job C.) Club dues and fees

B and C. Both happen simultaneously as the result of your decision. A = sunk cost.

Which economic system is criticized for lack of incentives for people to work hard and develop new lines of business?

Command or Centrally Planed

Explain the difference between explicit and implicit costs

Explicit: Direct, purchased, out-of-pocket costs, money changes hands. They are paid directly to resource suppliers outside of the firm.Implicit: Indirect costs, money does not change hands, an opportunity cost.

Based on the circular flow diagram, in which market are economic resources purchased?

Factor Market

Based on the circular flow diagram, who owns the factors of production?

Households

According to Marginal Analysis when should you continue to do or purchase something?

If MB > MC

What are some of the major economic concepts that are connected to the work of Adam Smith?

Invisible hand, laissez-faire, Wealth of Nations , factors of production

Micro or Macro Aggregate or total supply for goods and services

Macro

Micro or Macro How does a tax change affect an entire economy's output?

Macro

Micro or Macro Why are some countries richer than others?

Macro

Micro or Macro Why was the unemployment rate high (25%) during the Great Depression and relatively low (5%) in the 1990's?

Macro

Which economic system relies on individuals to answer the three economic questions?

Market

Micro or Macro Demand for a particular good or service

Micro

Micro or Macro How does a tax change affect a single firms output?

Micro

Micro or Macro The price of gasoline

Micro

Micro or Macro Total car production

Micro

Micro or Macro Wages of teachers

Micro

Most modern economies are what type of economic system?

Mixed

You make $45,000 per year at your current job with Whiz Kids Consultants. You are considering a job offer from Brainiacs, Inc., which would pay you $50,000 per year. Which of the following are elements of the opportunity cost of accepting the new job at Brainiacs, Inc.? c. the more spacious office at your new job

No. A more spacious office is an additional benefit of your new job and does not involve forgoing something else, so it is not an opportunity cost.

For this upcoming Saturday you have been invited to do different activities with three different friends. You can go to an Art Museum, go to Magic Mountain, or a professional sporting event. If you choose to stay at home and study econ instead (Professor Bledsoe would be so proud) what would be your opportunity cost? What would be your trade-offs?

One of the other three choices (museum, Magic Mountain, sporting event) would be the opportunity cost. Choices will vary, but opportunity cost is the most desirable alternative. All of the other three choices would be the trade-offs (museum, Magic Mountain, sporting event).

Wha are the two types of capital that are considered an economic resource?

Physical Capital Human Capital

Based on the circular flow diagram, in which market are goods and services purchased?

Product Market

Who was Adam Smith?

Scottish philosopher, one of the first people to offer an explanation of how a market economy works. Considered by many to be the father of modern economics.

Explain marginal benefit (MB)?

The additional benefit from the consumption/production of the next good or service.

Explain marginal cost (MC)?

The additional cost from the consumption/production of the next good or service.

In economics what does marginal mean?

The next one, additional, incremental, "one"

Positive or Normative? Why? Society *should* take measures to prevent people from engaging in dangerous personal behavior

This is a normative statement because it stipulates what should be done. In addition, it may have no "right" answer. That is, should people be prevented from all dangerous personal behavior if they enjoy that behavior-like skydiving? Your answer will depend on your point of view.

Positive or Normative? Why? People who engage in dangerous personal behavior impose higher costs on society through higher medical costs

This is a positive statement because it is a description of fact.

List the fundamental questions every society must address.

What to produce? How to produce? For whom to produce?

According to Marginal Analysis when should you stop to doing or purchasing something?

When MB = MC

You make $45,000 per year at your current job with Whiz Kids Consultants. You are considering a job offer from Brainiacs, Inc., which would pay you $50,000 per year. Which of the following are elements of the opportunity cost of accepting the new job at Brainiacs, Inc.? b. the $45,000 salary from your old job

Yes. One of the benefits of the new job is that you will be making $50,000. But if you take the new job, you will have to give up your current job; that is, you have to give up your current salary of $45,000, so $45,000 is one of the opportunity costs of taking the new job.

You make $45,000 per year at your current job with Whiz Kids Consultants. You are considering a job offer from Brainiacs, Inc., which would pay you $50,000 per year. Which of the following are elements of the opportunity cost of accepting the new job at Brainiacs, Inc.? a. the increased time spent commuting to your new job

Yes. The increased time spent commuting is a cost you will incur if you accept the new job. That additional time spent commuting-or equivalently, the benefit you would get from spending that time doing something else-is an opportunity cost of the new job.

land, labor, capital, entrepreneurship a bulldozer

capital

In one word, economics is the study of ....

choice or scarcity

land, labor, capital, or entrepreneurship time spent filling hamburgers at a restuarant

labor

land, labor, capital, entrepreneurship a river

land

4 categories of resources

land, labor, capital, entrepreneurship

Society has unlimited ______ but limited ________.

wants ; resources