ECOn

"Social welfare spending in Sweden occupies too large a portion of the national budget."

normative analysis

"The richest 1% of Americans should pay more taxes than the remaining 99%."

normative analysis

statements say something about how the world ought to be.

normative

If an economy is producing at a point inside its production possibilities curve

If an economy is producing at a point inside its production possibilities curve

Why is this restriction so useful in economic analysis?

If every variable is allowed to change, it would be impossible to isolate the impact of one variable on another.

Which of the following statements about market economies is FALSE? Market economies produce goods and services using the least costly production processes. Market economies sometimes fail to allocate resources efficiently. Market economies produce goods and services that are valued most by consumers.

Market economies produce goods and services using the fewest resources.

Which statement is TRUE regarding production efficiency?

Producing at the lowest possible resource cost is equivalent to getting as much output as possible from a given set of resources.

Which of the following statements about the outcomes in economic systems is FALSE? Planned economies often experience production inefficiencies and shortages. Market economies result in unequal distribution of goods and services. The invisible hand serves as a signaling mechanism to both consumers and producers in a market economy.

The government (chief/konohiki) owns all resources in an ahupua'a economy.

Which of the following statements about signaling mechanisms in economic systems is FALSE? The government directs the invisible hand in market systems. There is no effective signaling mechanism for people (the public) to communicate their needs or ideas in a planned economy. The ahupua'a system was informed by and responsive to the health of ecological systems.

The invisible hand directs resource allocation in a market economy.

The production possibilities frontier (PPF) shows the different combinations of goods that a fully employed economy can produce, given its available resources and current technology.

The production possibilities frontier (PPF) PPFs illustrate tradeoffs—if an economy operates at full employment (on the PPF), producing more of one good requires producing less of the other. A concave PPF shows how opportunity costs rise due to diminishing returns.

3 economic question

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

When an economy is producing the mix of goods and services MOST desired by society, that economy is considered to have

allocative efficiency

Which phrase do we use to indicate that we are trying to study the relationship between two variables while the values of all other variables are held unchanged?

cateris paribus

_____ refers to the way an economy allocates goods and services to consumers.

distribution

Investment in human capital refers to

education, on-the-job training, and professional training activities.

Goods that get produced in a planned economy are

goods valued by consumers.

All of the following are foundations of a market system EXCEPT

government ownership of resources.

The concept of private property ownership is present in i. planned economies. ii. market economies. iii. an ahupua'a economy.

i and ii

Holding all other relevant factors constant, as price increases, quantity demanded falls, and as price decreases, quantity demanded rises.

law of demand

resources are

limited, but wants are unlimited.

statements say something that describes how the world currently is.

positive

"A decrease in the supply of coconut will increase the price of German chocolate cake, a good for which coconut shavings are a key ingredient."

positive analysis

"The higher is the minimum wage, the higher the prices of goods and services are likely to be."

positive analysis

In a pure market economy, the government's primary role does NOT include

reallocating resources across the economy.

Opportunity costs

result from all decisions

The core problem in the study of economics is

scarcity

The basic idea of opportunity cost is that

the decision to use resources in one activity means that the resources cannot be used elsewhere.

Planned economies rely heavily on _____ to make most economic decisions.

the government

The ahupua'a system reflected top-down governance structure via

the kapu system

Planned economic systems have failed to successfully navigate the economic problem for all of the following reasons EXCEPT decision-makers lack the human capital to allocate resources efficiently. the distribution of goods is determined based on the values of a single decision-maker. decision-makers lack the information necessary to efficiently allocate resources.

there is no mechanism to signal needs to decision-makers.