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[ECON 2105H] - Midterm Exam Guide - Ultimate 15 pages long Study Guide!
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by OneClass1087628 , Spring 2017
15 Pages
41 Views

Department
Economics
Course Code
ECON 2105H
Professor
Mc Clain
Study Guide
Midterm

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UofG
ECON 2105H
MIDTERM EXAM
STUDY GUIDE
Tradeoffs
Using an economic model
Models are used to visually represent or simplify reality (in economics, they are
often mathematic equations)
Production Possibility Frontier (PPF)
Scarcity tells us:
o To increase production of one good, we must decrease production of
something else
Assume:
o Full employment
o Fixed technology
o Only two goods
Example:
Production
Possibility
National
Security
(million
servicemen)
Health
Care
(trillion
$)
A
0
15
B
1
14
C
2
12
D
3
9
E
4
5
F
5
0
If a PPF is bowed out, it means the ratio of x to y tradeoff is not 1:1
o Not all resources are equally suited to every job
o Diminishing marginal returns
o Marginal cost is increasing
find more resources at oneclass.com
find more resources at oneclass.com
Marginal cost: the opportunity cost of producing one more of a good
If a PPF is linear, it means the ratio of x to y tradeoff is 1:1
o Marginal cost is constant
PPF’s illustrate:
o Choice (produce at point A or point B?)
o Production efficiency (producing at any point on the curve)
o Ueployet ad iefficiecy (if you do’t use all of your
resources; producing inside the PPF)
o Scarcity (unattainable points)
o Growth (PPF shifts outward)
Allocative Efficiency: the point where we cannot produce more of one good
without giving up some other good that provides greater benefit (which
point is best)
Diminishing Marginal Benefit/Utility
Each additional unit of product has less value to a consumer
Creates downward sloping curve
Where MC > MB, you want to consume less
Where MC < MB, you want to consume
more
Where MC = MB, you are at the efficient
point. No other allocation can take place that
will make people better off
find more resources at oneclass.com
find more resources at oneclass.com

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Description
[ECON 2105H] Comprehensive Midterm Exam guide including any lecture notes, textbook notes and exam guides.find more resources at oneclass.com Tradeoffs Using an economic model Models are used to visually represent or simplify reality (in economics, they are often mathematic equations) Production Possibility Frontier (PPF)  Scarcity tells us: o To increase production of one good, we must decrease production of something else  Assume: o Full employment o Fixed technology o Only two goods Example: National Health Production Security Care Possibility (million (trillion servicemen) $) A 0 15 B 1 14 C 2 12 D 3 9 E 4 5 F 5 0  If a PPF is bowed out, it means the ratio of x to y tradeoff is not 1:1 o Not all resources are equally suited to every job o Diminishing marginal returns o Marginal cost is increasing find more resources at oneclass.com
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