BSNS 113 - Pre Midterm Questions And Correct Solved Solutions.

Positive Economics - Answer Is objective and fact based as opposed to normative economics which is about what the world should look like. Opportunity Cost - Answer The value of the next best alternative forgone Production Possibilities Frontier - Answer Show the combination of technically efficient goods that an economy can produce given a certain level of resources and technology Why is the PPF bowed outwards? - Answer because some resources are more suited to the production of one good than another (the law of increasing opportunity cost). Technical Efficiency - Answer Points along the PPF curve - when the economy is producing the maximum amount of goods given it's services. Economic Efficiency - Answer The 'best combination of goods that delivers the preference of consumers. Absolute Advantage - Answer the ability to produce a good using fewer inputs than another produce Comparative Advantage - Answer Ability to produce at a lower opportunity cost than someone else - people should specialise where they have a comparative advantage Terms of Trade - Answer The terms at which a party would source a good or service from another person, rather than just do it themselves - The price will be found between opportunity costs. Unit of account - Answer Common denominator that allows us to compare prices e.g. money Medium of exchange - Answer money for something Store of value - Answer Allows you to sell now and buy later What happens in equilibrium - Answer the market clears, all are willing to buy at their desired price and all are willing to sell at their desired price.