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Study Guide 1

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ECON 2001.01
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H201 Study Guide 1 Chapter 1 1. What is the difference between macro and micro economics? 2. Why is there a subject of economics? 3. What is the definition of “scarcity”? 4. What is the difference between scarcity and poverty? 5. What is “opportunity cost”? 6. Why did Milton Friedman say there is no such thing as a free lunch? 1 7. Can an individual ever enjoy a “free lunch”? 8. Does economics require the assumption that people are rational? Does economics require the assumption that people are predictable? 9. Why do economists focus on personal incentives? 10. What is meant by the statement “Remember the Secondary Effects”? 11. Is the value of a good the same thing as the price of a good? 12. What is the difference between a theory and an hypothesis? 13. Why must hypotheses be testable? 14. How can we evaluate the usefulness of a theory? 15. When two events (A and B) happen at the same time (correlation), what are the possible causal relationships? 2 16. What is the “Post Hoc Fallacy”? 17. What is the definition of Ceteris Parabis? 18. Why do economists use regression analysis in trying to control for the ceteris parabis problem? 19. What is the problem of “self selection”? 20. What is the problem of “Moral Hazard”? 21. What is the “Fallacy of Composition”? 22. Why did Adam Smith not publish the first economics textbook until 1776? 23. What is the principle of “specialization according to comparative advantage? 24. What is the most important factor that limits specialization? 3 25. What did Adam Smith mean when he referred to an “invisible hand”? 26. What is the key requirement necessary if the pursuit of self-interest is to benefit society? 27. What are 3 reasons why it is difficult to forecast when we will run out of a resource? 28. What are 3 questions that every economy must answer? 29. How does a market economy answer: What to produce? How to produce? For whom to produce? 30. What are the factors of production – how are they defined – and what returns do they earn? 31. What is the definition of human capital? 4 32. What is the meaning of “Market Failure”? 33. What are five reasons for market failure 34. What is the definition of fiscal policy and who conducts fiscal po
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