Econ unit 1
focuses on facts, descriptions, and theoretical relationships.
A positive statement is one that... -focuses on facts, descriptions, and theoretical relationships. -is derived by deduction. -focuses on the best course of action and is based on value judgments. -is derived by induction
increase the price and sales of domestic producers.
A protective tariff will create an efficiency gain in the domestic economy. increase the welfare of domestic consumers. increase the sales of foreign exporters. increase the price and sales of domestic producers.
increasing
Type of production: A B C D E Computers: 0 20 40 60 80 DVDs: 80 68 53 30 0 As we produce more computers, opportunity costs are (increasing/decreasing)
12
Type of production: A B C D E Computers: 0 20 40 60 80 DVDs: 80 68 53 30 0 What is the opportunity cost of computers when moving from point A to point B?
15
Type of production: A B C D E Computers: 0 20 40 60 80 DVDs: 80 68 53 30 0 What is the opportunity cost of computers when moving from point B to point C?
23
Type of production: A B C D E Computers: 0 20 40 60 80 DVDs: 80 68 53 30 0 What is the opportunity cost of computers when moving from point C to point D?
30
Type of production: A B C D E Computers: 0 20 40 60 80 DVDs: 80 68 53 30 0 What is the opportunity cost of computers when moving from point D to point E?
box-by-box inspection requirements for imported fruit
Which is an example of a nontariff barrier (NTB)? an excise tax on the dollar value of imported goods an export subsidy an excise tax on the physical volume of imported goods box-by-box inspection requirements for imported fruit
money
Which of the following is not considered by economists to be an economic resource? a forest money factory workers computers at a retail store.
household items things that businesses buy
consumer goods are ..... capital goods are ...
fixed technology
the state of technology (the methods used to produce output) is constant
fixed resources
using all resources now (producing more of one thing) so another has to be given up. ex gong to war so cant produce fridges
Employ the other factors of production Take initiative Make strategic business decisions Innovate Take risk
what do Entrepreneurs do?
is based on value judgments.
A normative statement is one that... -applies only to microeconomics. -is based on value judgments. -is based on the law of averages. -applies only to macroeconomics.
NAFTA
Agreement between U.S., Canada, and Mexico Established a free trade zone between the countries Trade has increased in all countries Enhanced standard of living
Law of increasing opportunity costs
As more of a particular good is produced, its marginal opportunity costs increase
positive economics
Economic statements that are factual (facts) (can be supported or disproved with data. There isn't any subjectivity.)
Normative economics
Economic statements that involve value judgments (opinions) (is what "ought to be." This is subjective since people have different opinions about what is desirable.)
fewer
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 5 units at which MB < MC:
European Union
Initiated in 1958 as Common Market Abolished tariffs and import quotas between member nations Established common tariff with nations outside the EU Created Euro Zone with one currency
correlation not causation
Just because two things happen doesn't mean they are the cause of each other
marginal analysis
Making choices based on comparing marginal benefits with marginal costs:
has reduced most trade barriers between Canada, Mexico, and the United States.
NAFTA has reduced most trade barriers between Canada, Mexico, and the United States. benefits workers in the participating nations but hurts consumers by raising prices. allows completely unrestricted movement of goods, services, and resources between the member nations. has increased the standard of living in the North African member nations.
South Cantina is fully and efficiently using its resources, but North Cantina is not.
North Cantina Production Possibilities A B C D E F Capital Goods 5 4 3 2 1 0 Consumer Goods 0 10 18 24 28 30 South Cantina Production Possibilities A B C D E F Capital Goods: 5 4 3 2 1 0 Consumer Goods: 0 8 15 21 25 27 Refer to the tables. Suppose that North Cantina is producing 2 units of capital goods and 17 units of consumer goods, while South Cantina is producing 2 units of capital goods and 21 units of consumer goods. We can conclude that -neither South Cantina nor North Cantina is fully and efficiently using its resources. -North Cantina is fully and efficiently using its resources, but South Cantina is not. -South Cantina is fully and efficiently using its resources, but North Cantina is not. -both South Cantina and North Cantina are fully and efficiently using their resources.
export wheat
Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will neither export nor import wheat. import wheat. export wheat. have a domestic shortage of wheat.
was established to resolve disputes arising under world trade rules.
The World Trade Organization -enhances world trade by providing interest rate subsidies to foreign borrowers who buy exports on credit. -is also known as NAFTA. -was established to resolve disputes arising under world trade rules. -is also known as the International Monetary Fund (IMF).
Utiity
The pleasure, happiness, or satisfaction obtained from consuming a good or service
Loaded Terminology
terminology that tend to use inflammatory words. intended to bias others
is the practice of selling goods in a foreign market at less than cost.
As it relates to international trade, dumping -is a form of price discrimination illegal under U.S. antitrust laws. -constitutes a general case for permanent tariffs. -is defined as selling more goods than allowed by an import quota. -is the practice of selling goods in a foreign market at less than cost.
yes no no
Assume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula ≡ 4 cans of tuna fish Tunata: 1 can baby formula ≡ 6 cans of tuna fish Would the following terms of trade be acceptable to both nations? i. 1 can baby formula ≡ 4.5 cans tuna fish: ii. 1 can baby formula ≡ 3 cans tuna fish: iii. 1 can baby formula ≡ 7 cans tuna fish:
baby formula tuna fish
Assume that the comparative-cost ratios of two products—baby formula and tuna fish—are as follows in the nations of Canswicki and Tunata: Canswicki: 1 can baby formula ≡ 4 cans tuna fish Tunata: 1 can baby formula ≡ 6 cans tuna fish In what product should each nation specialize? Canswicki should produce_______and Tunata should produce_____
comparative advantage.
Countries engaged in international trade specialize in production based on relative inflation rates. comparative advantage. relative exchange rates. relative levels of GDP.
import quota
Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a(n) export subsidy. protective tariff. import quota. voluntary export restriction.
WTO (World Trade Organization)
Established by Uruguay Round of GATT 161 member nations in 2015 Oversees trade agreements and rules on disputes Critics argue that it may allow nations to circumvent environmental and worker-protection laws
fewer
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 11 units at which MC = $4 and MB = $3:
current number
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 43,277 units at which MC = $99 and MB = $99:
more
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 82 units at which MC < MB:
more
For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. 3,000 units at which MC = $10 and MB = $13:
the sun
Frederic Bastiat's satirical argument against protectionism called for protecting domestic producers from the sun. other European countries. fire. invention of the electric light.
California has the comparative advantage in producing almonds. This is true because California has to give up less sugar in order to produce a ton of almonds. The easiest way to see this is to begin by dividing both sides of California's opportunity-cost ratio by 2. That will give you ½S ≡ 1A. That version of California's opportunity-cost ratio makes it clear that for every ton of almonds that California produces, it must forgo ½ ton of sugar. By contrast, Hawaii's opportunity-cost ratio of 4S ≡ 1A indicates that for every ton of almonds that Hawaii produces, it must forgo 4 tons of sugar. As a result, California has a comparative advantage in producing almonds because it can produce them at a lower opportunity cost as measured by the amount of sugar that must be forgone in order to free up enough resources to produce one ton of almonds.
Suppose that the opportunity-cost ratio for sugar and almonds is 4S ≡ 1A in Hawaii but 1S ≡ 2A in California. Which state has the comparative advantage in producing almonds?
land, labor, capital, and entrepreneurial ability.
The four factors of production are... -labor, capital, entrepreneurial ability, and money. -land, labor, capital, and money. -labor, capital, technology, and entrepreneurial ability. -land, labor, capital, and entrepreneurial ability.
consumption beyond domestic production possibilities.
The greatest benefit to an economy from international trade is -consumption beyond domestic production possibilities. -greater employment in the export sector of the economy. -full employment of its labor force. -the economic power it gives a nation over other countries.
opportunity cost
The next-best thing that must be forgone in order to produce one more unit of a given product:
if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
The production possibilities curve illustrates the basic principle that the production of more of any one good will in time require smaller and smaller sacrifices of other goods. an economy's capacity to produce increases in proportion to its population size. an economy will automatically obtain full employment of its resources. if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.
economics
The social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity and its wants exceed society's productive capacity:
Macroeconomics
The study of the entire economy or a major aggregate of the economy (the entire economy is examined and it also looks at the basic groups in the economy such as all households, all businesses, all of the government, or the foreign sector. All goods and services produced in the economy, or the unemployment rate for the entire labor force, or the inflation rate are all macroeconomics topics.)
Microeconomics
The study of the individual consumer, firm, or market (an individual consumer, household, or industry is examined. Examining the price of a particular product or demand or supply of a particular product's market is studied in this type of economics)
ratio at which nations will exchange two goods.
The terms of trade reflect the -cost conditions embodied in a single country's production possibilities curve. -ratio at which nations will exchange two goods. -rate at which gold exchanges internationally for any domestic currency. -fact that the gains from trade will be equally divided.
GATT (General Agreement on Tariffs and Trade)
Three principles: Equal, nondiscriminatory trade between member nations Reduction in tariffs Elimination of import quotas
can attain some combination of goods lying outside its production possibilities curve.
Through specialization and international trade, a nation -will only attain some combination of goods lying within its production possibilities curve. -can attain some combination of goods lying outside its production possibilities curve. -can move from a high consumption-low investment to a high investment-low consumption point on its production possibilities curve. -will cause its production possibilities curve to shift leftward.
The EU has abolished most trade barriers among participating countries and has common tariffs applied to non-EU goods.
Which of the following statements about the European Union (EU) is true? The EU has abolished most trade barriers among participating countries and has common tariffs applied to non-EU goods. The EU has eliminated most barriers to the trade of goods and services among participating nations but largely restricts the movement of labor and capital. All members of the EU use a common currency (the euro). Trade within the EU is liberalized, but EU nations set most of their own policies with regard to trade with non-EU nations.
if the marginal benefit of the movie exceeds its marginal cost.
You should decide to go to a movie... -if your income will allow you to buy a ticket. -if the marginal benefit of the movie exceeds its marginal cost. -if the marginal cost of the movie exceeds its marginal benefit. -because movies are enjoyable.
Full employment
all resources are fully employed (land, labor, capital)
A budget line is used to illustrate the greatest combinations of two goods that can be purchased with a certain amount of income. It reflects the greatest amount of these two goods that can be purchased. A budget line is created for a specific level of income so that when income changes, the budget line will shift to show the higher or lower incomes. -Attainable and unattainable combinations -Trade-offs and opportunity costs
budget line
post hoc fallacy
false assumption that because one event occurred before another event, it must have caused that event ex. superstitions
More resources Improved resource quality:training employees Technological advances
how can economic growth be achieved?
Specialization Increased production possibilities
international trade allows for...
fallacy of composition
often occurs when we assume that what benefits one person will also benefit others. When there is a traffic jam on the highway, it will benefit me to take the back roads if I am the only one who does that. If everyone gets off of the highway and tries to take the back roads, then the back roads will become very congested and it could actually take longer.
resources
refers to inputs that are used in the production of other goods and services.
Land refers to all-natural resources. Labor is the human resource and refers to all physical and mental talents used in the production of a good or service. Capital refers to anything man-made and used to produce goods and services. Capital is an investment good; it is not the same as money. Money isn't even considered a resource. Entrepreneurs are another type of human resource but is different from labor mainly because entrepreneurs are risk-takers.
what does each of the 4 economic resources refer to?
land-rent labor-wages capital- interest Entrepreneurship ability- profit/loss
what is the payment of the 4 economic recources?
creative destruction
when new technology destroys the market for old/ existing products ex. CDs destroyed the cassette market
economizing problem exists because of the combination of a limited income and unlimited wants.
why does economizing problem exists?
promotes efficiency promotes competition
why would be want free trade?