ECON 102 EXAM 1 AUSTIN BOYLE
scarcity - Answers -people want more than is freely available from nature, leads to
competition, would still exist is every individual as rich, resources are limited but wants
are unlimited
ex) textbooks
microeconomics - Answers -focuses on individuals, firms ,industries, households
ex) babies advertising, gas prices, driving
macroeconomics - Answers -focuses on industries, countries, and the WORLD
ex) nation unemployment rate, inflation rate, yearly output of goods and services
opportunity cost - Answers -the value of the next best alternative that was sacrificed to
obtain a good or satisfy a want
incentives - Answers -how people allocate their limited resources in an attempt to
satisfy unlimited wants
postive incentive - Answers -makes you want to do things
ex) end of year bonuses
negative incentives - Answers -doesnt make you want to do things
ex)speeding ticket
direct effect of incentives - Answers -usually easy to recognize,
ex) if gas station lowers price of its gas, it will attract new customers that normally
wouldn't stop at that station
indirect effect of incentives - Answers -hard recognize, (unintended consequences)
ex)if gas station lowers the price of its gas, it will encourage consumers to drive more
because driving will be less expensive
unintended consequences - Answers -unintended actions that result from providing
incentives
ex: society wants to help people go through the hard times but it does not want to take
away their motivation to work
secondary effect - Answers -often overlooked by politicians
ex) killing children with airline safety regulation.
FAA 2015: wanted carseats for plane rides for kids. parents would have to pay for an
extra seat which means they may just drive to their destination putting child at risk.
marginal - Answers -additional
, information is costly but helps make better decision - Answers -ex: new car- website
made you pay for all car information, although it costed money, it made you make the
right decision.
ceteris paribus - Answers -all is equal, fixed amount of productive resources
three basic economic questions - Answers -1. what and how much will be produced
2. how will items be produced
3. for whom will items be produced
central planning - Answers -"centralized command and planing" government is in
charge, supreme leader makes the decisions, difficult to obtain information that would
be captured by prices
market system - Answers -decentralized, individuals and families own the means of
production, prices serve as signals that provide information
mixed economic system - Answers -some economic decisions are made by firms and
households, and some decisions are made by government
3 rationality assumptions - Answers -1. interested only in own satisfaction
2, choices always align with long term interest
3. can consider every choice
land(5 types of resources) - Answers -location, climate, water, vegetation
labor - Answers -humans who work (building something )
physical capital - Answers -building, equipment(bulldozers) machines (sewing), canals
human capital - Answers -learning by doing-apprenticeship or practice , formal
education: college certificate programs, mechanics
entrepreneurship - Answers -performed by humans, takes risks, start businesses
production possibilities curve (ppc) - Answers -possible combinations of output for 2
goods at a given time, using all resources.
bowed PPC - Answers -usually outward, opportunity cost of production increases
straight line PPC - Answers -opportunity cost of production is constant
what can PPC easily show - Answers -efficient, inefficient, and unattainable points
what kind of cost is most clearly defined in PPC - Answers -opportunity cost
scarcity - Answers -people want more than is freely available from nature, leads to
competition, would still exist is every individual as rich, resources are limited but wants
are unlimited
ex) textbooks
microeconomics - Answers -focuses on individuals, firms ,industries, households
ex) babies advertising, gas prices, driving
macroeconomics - Answers -focuses on industries, countries, and the WORLD
ex) nation unemployment rate, inflation rate, yearly output of goods and services
opportunity cost - Answers -the value of the next best alternative that was sacrificed to
obtain a good or satisfy a want
incentives - Answers -how people allocate their limited resources in an attempt to
satisfy unlimited wants
postive incentive - Answers -makes you want to do things
ex) end of year bonuses
negative incentives - Answers -doesnt make you want to do things
ex)speeding ticket
direct effect of incentives - Answers -usually easy to recognize,
ex) if gas station lowers price of its gas, it will attract new customers that normally
wouldn't stop at that station
indirect effect of incentives - Answers -hard recognize, (unintended consequences)
ex)if gas station lowers the price of its gas, it will encourage consumers to drive more
because driving will be less expensive
unintended consequences - Answers -unintended actions that result from providing
incentives
ex: society wants to help people go through the hard times but it does not want to take
away their motivation to work
secondary effect - Answers -often overlooked by politicians
ex) killing children with airline safety regulation.
FAA 2015: wanted carseats for plane rides for kids. parents would have to pay for an
extra seat which means they may just drive to their destination putting child at risk.
marginal - Answers -additional
, information is costly but helps make better decision - Answers -ex: new car- website
made you pay for all car information, although it costed money, it made you make the
right decision.
ceteris paribus - Answers -all is equal, fixed amount of productive resources
three basic economic questions - Answers -1. what and how much will be produced
2. how will items be produced
3. for whom will items be produced
central planning - Answers -"centralized command and planing" government is in
charge, supreme leader makes the decisions, difficult to obtain information that would
be captured by prices
market system - Answers -decentralized, individuals and families own the means of
production, prices serve as signals that provide information
mixed economic system - Answers -some economic decisions are made by firms and
households, and some decisions are made by government
3 rationality assumptions - Answers -1. interested only in own satisfaction
2, choices always align with long term interest
3. can consider every choice
land(5 types of resources) - Answers -location, climate, water, vegetation
labor - Answers -humans who work (building something )
physical capital - Answers -building, equipment(bulldozers) machines (sewing), canals
human capital - Answers -learning by doing-apprenticeship or practice , formal
education: college certificate programs, mechanics
entrepreneurship - Answers -performed by humans, takes risks, start businesses
production possibilities curve (ppc) - Answers -possible combinations of output for 2
goods at a given time, using all resources.
bowed PPC - Answers -usually outward, opportunity cost of production increases
straight line PPC - Answers -opportunity cost of production is constant
what can PPC easily show - Answers -efficient, inefficient, and unattainable points
what kind of cost is most clearly defined in PPC - Answers -opportunity cost
