ECON 101 Midterm: Economics 101 Midterm 1

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15 Feb 2018
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Economics101Final
AbsoluteAdvantage:useslowerinputs/lowerhoursoflabor
ComparativeAdvantage:loweropportunitycost
Chapter1:TenPrinciplesofEconomics
1. Peoplefacetradeoffs
2. Thecostofsomethingiswhatyougiveuptogetit
3. Rationalpeoplethinkatthemargin
4. Peoplerespondtoincentives
5. Tradecanmakeeveryonebetteroff
6. Marketsareusuallyagoodwaytoorganizeeconomicactivity
7. Governmentscansometimesimprovemarketoutcomes
8. Pricesrisewhenthegovernmentprintstoomuchmoney
9. Societyfacesashortruntradeoffbetweeninflationandunemployment
TermstoRememberfromChapter1:
Scarcityshortinsupply,shortage
Efficiencysocietyisgettingthemaximumbenefitsfromitsscarceresources
Equalitythosebenefitsaredistributeduniformlyamongsociety’smembers
Opportunitycostwhatyougiveuptogetthatitem
Rationalpeoplesystematicallyandpurposefullydothebesttheycantoachievetheirobjectives,
giventheavailableopportunities
Marginalchangeasmallincrementaladjustmenttoanexistingplanofaction
Marginalbenefitandmarginalcost
Incentivesomethingthatinducesapersontoact
Marketeconomypricesofgoodsareguidedbyindividualbusinessesandcitizens
Centrallyplannedeconomystateorgovernmentmakeseconomicdecisions
Propertyrightstheabilityofanindividualtoownandexercisecontroloverscarceresources
Marketfailurereferstoasituationinwhichthemarketonitsownfailstoproduceanefficient
allocationofresources
Externalityimpactofoneperson’sactionsonthewellbeingofabystander
Marketpowerabilityofasinglepersonorfirmtoundulyinfluencemarketprices
Productivityamountofgoodsandservicesproducedbyeachunitoflaborinput
Inflationanincreaseintheoveralllevelofpricesintheeconomy
Businesscycletheirregularandlargelyunpredictablefluctuationsineconomicactivity,as
measuredbytheproductionofgoodsandservicesorthenumberofpeopleemployed
Invisiblehandtheideathatifeveryonefendsforthemselvesandislooksoutforthemselvesin
termsofincomethatthemarketwillcontrolitself,guidingthemarket(AdamSmith).
(Capitalism)
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Chapter2:ThinkingLikeanEconomist
1. ModelsandAssumptions
2. CircularFlowDiagram
3. ProductionPossibilityFrontier(PPF)
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