ECON 1B03 Lecture Notes - Lecture 1: Rationality, Opportunity Cost, Tim Hortons

36 views3 pages

erincat447

21 May 2018

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Economics Chapter 1

Economics: the study of ho soiety alloates sare resoures to satisfy soiety’s uliited ats

- All things are scarce, so we need to make decisions about how to allocate these resources to

keep everyone happy

Scarcity: means that society has limited resources and therefore cannot produce all the goods and

services people wish to have

Microeconomics: focuses on individual parts of the economy

- How households and firms make decisions and how they interact in specific markets

Macroeconomics: looks at the economy as a whole

- Economy-wide phenomena, including inflation, unemployment and economic growth

Market Economy: allocates resources through the decentralized decisions of firms and households

(households and firms make all decisions)

- No major decision maker or government telling people what they can or cannot

produce/consume

- Households decide what to buy and who to who to work for

- Firms decide who to hire and how much to produce

Basic Principles

- Every economic issue involves individual choice

- Households

o Who will work

o Attend college?

- Firms

o What good and how much will be produced?

o What resources should be used in production?

o At what price should goods be sold?

Economics

- We assume that when people are making decisions they are acting rationally

- Economic Rationality: systematically and purposefully using information to make the best

deisio for oeself to ahiee oe’s ojeties

- Perfect information: everyone knows everything with no uncertainty

- Asymmetrical information: when someone knows more about something than does someone

else

o Chef knows if salmon is fresh, but buyer does not

- Resource: anything that can be used to make something else

o Also called: factors of production or inputs

o Big 4 resources:

▪ Labor

find more resources at oneclass.com

Unlock document

This preview shows page 1 of the document.
Unlock all 3 pages and 3 million more documents.

Already have an account? Log in

Shanghaibalcony1234 and 37744 others unlocked

ECON 1B03 Full Course Notes

Verified Note

46 documents

Document Summary

Economics: the study of ho(cid:449) so(cid:272)iety allo(cid:272)ates s(cid:272)ar(cid:272)e resour(cid:272)es to satisfy so(cid:272)iety"s u(cid:374)li(cid:373)ited (cid:449)a(cid:374)ts. All things are scarce, so we need to make decisions about how to allocate these resources to keep everyone happy. Scarcity: means that society has limited resources and therefore cannot produce all the goods and services people wish to have. Microeconomics: focuses on individual parts of the economy. How households and firms make decisions and how they interact in specific markets. Macroeconomics: looks at the economy as a whole. Economy-wide phenomena, including inflation, unemployment and economic growth. Market economy: allocates resources through the decentralized decisions of firms and households (households and firms make all decisions) No major decision maker or government telling people what they can or cannot produce/consume. Households decide what to buy and who to who to work for. Firms decide who to hire and how much to produce. We assume that when people are making decisions they are acting rationally.

Related Questions

1/ All the problems studied in economics arise from

a. the unequal distribution of income

b. the scarcity of resources

c. inappropriate government action

d. overpopulation

e. war

2/ The overall performance of the economic system as a whole is the focus of

a. macroeconomics

b. public economics

c. international finance

d. labor economics

e. microeconomics

3/ After graduating from high school, Steve had the following three choices for his immediate future, listed in order of preference: (1) attend our campus, (2) work in a printed circuit board factory, or (3) attend a rival college. His opportunity cost of going to college here includes which of the following?

a. The income he could have earned at the printed circuit board factory plus the direct cost of attending college here (tuition, textbooks, etc.)

b. The benefits he could have received from going to the rival college.

c. Only the tuition and fees paid for taking classes here.

d. Cannot be determined from the information given.

e. The cost of books and supplies at the rival college.

4/ The question of scarce resources and unlimited wants are addressed in

a. psychology

b. history

c. anthropology

d. political science

e. economics

5/ Consider an economic model designed to analyze the purchasing decisions of households. An assumption that a household chooses between only two goods would be an example of an

a. positive assumption

b. simplifying assumption

c. macroeconomic assumption

d. financial assumption

e. critical assumption

6/ Which of the following explains why economists may disagree over normative issues?

a. They have different beliefs and values.

b. They often employ different statistical techniques when examining data.

c. Some work only on microeconomic issues, while others focus exclusively on macroeconomic issues.

d. They examine the same data to draw their conclusions.

e. They need to disagree to publish their research findings.

7/ Suppose your friends take you out for dinner on your birthday, and you have a much better time than you would have had to do anything else. There is still an opportunity cost, even though they will not let you pay for anything. True/False

8/ Microeconomics

a. addresses scarcity from a global perspective

b. is purely theoretical and has little value in explaining real-world phenomena

c. focuses on what is happening in the economy as a whole

d. examines how individuals, households, and firms make economic decisions

e. answers the fundamental economic questions of how, when, where, and why.

9/ People and organizations have to make choices about how to allocate time and money because

a. religious values conflict with economics

b. time and money are both scarce

c. government require it

d. there are unlimited resources

e. corporations control our lives

10/ The objective of an economic model is to

a. yield a better understanding of important relationships

b. use simplifying assumptions to make positive economic statements

c. be an accurate description of reality

d. predict real-world occurrences with complete accuracy

e. use basic principles of economics to derive fundamental assumptions about human behavior.

jaderaven304

Part 1.Choose the correct answer of the following:

1.In a market economy, economic activity is guided by

a.Self-interest and prices

b.The government.

c.Corporations.

d. Central planners.

2. Which of the following decisions must be made by all economies?

a.How much to produce? When to produce? How much does it cost?

b.What to produce? How to produce? For whom to produce?

c.What is the price? Who will produce it? Who will consume it?

d. None of the above

3.Since the resources used in the production of goods and services are limited, society must:

a.Reduce the use of those resources

b.Try to get more resources

c.Make choices about how to use resources

d.Focus on their most abundant resource

4.Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

a.Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.

b.There is no such thing as a free lunch.

c.People buy more when prices are low than when prices are high.

d. No matter how much people earn, they tend to spend more than they earn.

5.If real GDP increased by 2 percent, then

a.Government spending increased by 2 percent

b.The price level has increased by 2 percent

c.Real output/production has increased by 2 percent

d. The increase might have been caused by an increase in the price level or output, but we cannot tell for sure

6. Which of the following would show an efficient economy?

a.Uses the least costly amount of resources available

b.Has a small amount of people who do not work

c.Resources are used to make the most goods and services possible

d.None of the above

7.What is the type of unemployment that occurs when people take time to find a job?

a.cyclical

b.frictional

c.Disguised

d.structural

emeraldoyster872

21. The English word that comes from the Greek word for "one who manages a household" is

A- market
B- consumer
C- producer
D- economy

Question 22. 22. For a college student who wishes to calculate the true costs of going to college, the costs of room and board

A- should be counted in full, regardless of the costs of eating and sleeping elsewhere.
B- should be counted only to the extent that they are more expensive at college than elsewhere.
C- usually exceed the opportunity cost of going to college.
D- plus the cost of tuition, equals the opportunity cost of going to college.

Question 23. 23. The phenomenon of scarcity stems from the fact that

A- most economies' production methods are not very good.
B- in most economies, wealthy people consume disproportionate quantities of goods and services.
C- governments restrict the production of too many goods and services.
D- resources are limited.

Question 24. 24. Central planning refers to

A- markets guiding economic activity. Today many countries that had this system have abandoned it.
B- markets guiding economic activity. Today many countries that did not have this system have implemented it.
C- government guiding economic activity. Today many countries that had this system have abandoned it.
D- government guiding economic activity. Today many countries that did not have this system have implemented it.

Question 25. 25. Senator Brown wants to increase taxes on people with high incomes and use the money to help the poor. Senator Johnson argues that such a tax will discourage successful people from working and will therefore make society worse off. An economist would say that

A- we should agree with Senator Brown.
B- we should agree with Senator Johnson.
C- a good decision requires that we recognize both viewpoints.
D- there are no tradeoffs between equity and efficiency.

Question 26. 26. Max and Maddy charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, seven people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have seven or five cars parked on their lawn does not affect their costs. From this information, it follows that

A- they should leave the price at $10.
B- it does not matter if they charge $10 or $15.
C- they would do better charging $15 than $10.
D- they should raise the price even more.

Question 27. 27. A circular flow diagram is a model that

A- helps to explain how participants in the economy interact with one another.
B- helps to explain how the economy is organized.
C- incorporates all aspects of the real economy.
D- Both (a) and (b) are correct.

Question 28. 28. In the markets for goods and services in the circular-flow diagram,

A- households provide firms with savings for investment.
B- households provide firms with labor, land, and capital.
C- firms provide households with output.
D- firms provide households with profit.

Question 29. 29. Incomes of U.S. households in the 1970s and 1980s

A- grew rapidly, due to the widespread success of labor unions in pushing up wages during those decades.
B- grew rapidly, due to several increases in the minimum wage during those decades.
C- grew rapidly, due to government policies that discouraged the importation of foreign products during those decades.
D- grew slowly, due to the slow growth of the output of goods and services per hour of U.S. workers' time during those decades.

Question 30. 30. For economists, statements about the world are of two types:

A- assumptions and theories.
B- true statements and false statements.
C- specific statements and general statements.
D- positive statements and normative statements.

marooncat628

ECON 1B03 Lecture Notes - Lecture 1: Rationality, Opportunity Cost, Tim Hortons

ECON 1B03 Full Course Notes

Document Summary

Get access

Related Documents

ECON 1B03 Lecture Notes - Lecture 2: Macroeconomics, Opportunity Cost, Invisible Hand

[ECON 1B03] - Final Exam Guide - Ultimate 115 pages long Study Guide!

ECON 1B03 Lecture 1: Topic 1- Introduction to Microeconomics

Related Questions