PRINCIPLES OF ECONOMICS EXAM B
CERTIFICATION EVALUATION TESTED
QUESTIONS COMPLETE ANSWERS
◉ Economics.
Answer: how to best allocate scarce resources (have fewer than
ultimately want)
◉ Trade Offs.
Answer: Always give up something to get something else (when
spend more on something else or devote more time to something
less on another thing)
◉ Efficiency vs. equality trade off.
Answer: --efficiency means getting most from scare resources
--equality means more uniform distribution
--Always conflict between the two -
◉ Opportunity cost.
Answer: --WHAT YOU GIVE UP TO GET SOMETHING ELSE (always
want it in terms of something else)
,-- or in other words how something would have been used (what
could have gotten out of it whether it's time or money) if you were
not doing this
--- example-- the opportunity cost of going to college is the tuition
payment in addition to the time could have spend working
◉ Marginal Costs and Benefits.
Answer: * in order to act, the marginal benefits always have to be
greater than the marginal costs--- THE MARGINAL COSTS AND
MARGINAL BENEFIT NOT TOTAL
* in types of MC could ask you disregard what you have already
spent and look at the marginal (how much would be added and then
the benefit and then compare)
◉ Opportunity cost calculations.
Answer: * what you are giving up/ what you are getting (makes
sense bc always want in terms of the thing you are giving up-- the
other unit-- ALWAYS IN TERMS OF THE OTHER THING)
◉ Chap 2--- this chapter is also not super important; mostly shows
the scientific method of economists and how use that same process.
Answer:
◉ Production Possibilities Curve (what is it, the layout, what does
slope represent, feasibility of points, and why PPFs are bowed out).
,Answer: * graphical representation of two goods and combos of
quantity of output that can be produced given inputs
* layout== two endpoints that show production of all on one good
and then one good per axis
* slope= opportunity cost of one good in terms of another (so like
y/x would give opp cost of good x)
* feasibility= points outside are not possible, inside are not not
efficient; points MOST EFFICIENT ON CURVE
* why bowed out= law of increasing app costs (as produce more of
one good app cost of good B goes up)
◉ Shifts to PPF (two ways).
Answer: 1. if have more technology ( say you have computers and
cars-- just the number of computers will go up so one endpoint will
be the same and other will move up but whole thing will move up)
2. Also due to more/ better FOP (land, labor, capital)
3. Better economy
◉ Micro vs. Macro.
Answer: Micro= how households and firms make decisions on
smaller scale
Macro= how all markets operate together combined w gov
, ◉ Chapter 3-- Gains from Trade-- this is an impt chapter-- comp adv,
specialization, op cost w comp adv..
Answer:
◉ Gains from trade.
Answer: * trade makes everyone better off
* even can produce two goods independently (using just two here to
simplify), trade allows you to specialize and be more efficient
◉ Absolute Advantage.
Answer: * what most ppl think of when think about who has an
advantage for trade
* if can produce more in same time period or produce same amount
in less
* someone can have an abs. adv. in both goods, but never a
comparative advantage in both and we use comp adv. for deciding
who should trade with whom
◉ Comparative Advantage ( relationship to opp cost in definition;
can someone not have one at all or have one in both?).
Answer: * relationship to opportunity cost-- whoever has the
LOWEST opportunity cost for a given product has the comparative
advantage in that good and should specialize in it and then get the
other good mostly from another person who specializes in that
CERTIFICATION EVALUATION TESTED
QUESTIONS COMPLETE ANSWERS
◉ Economics.
Answer: how to best allocate scarce resources (have fewer than
ultimately want)
◉ Trade Offs.
Answer: Always give up something to get something else (when
spend more on something else or devote more time to something
less on another thing)
◉ Efficiency vs. equality trade off.
Answer: --efficiency means getting most from scare resources
--equality means more uniform distribution
--Always conflict between the two -
◉ Opportunity cost.
Answer: --WHAT YOU GIVE UP TO GET SOMETHING ELSE (always
want it in terms of something else)
,-- or in other words how something would have been used (what
could have gotten out of it whether it's time or money) if you were
not doing this
--- example-- the opportunity cost of going to college is the tuition
payment in addition to the time could have spend working
◉ Marginal Costs and Benefits.
Answer: * in order to act, the marginal benefits always have to be
greater than the marginal costs--- THE MARGINAL COSTS AND
MARGINAL BENEFIT NOT TOTAL
* in types of MC could ask you disregard what you have already
spent and look at the marginal (how much would be added and then
the benefit and then compare)
◉ Opportunity cost calculations.
Answer: * what you are giving up/ what you are getting (makes
sense bc always want in terms of the thing you are giving up-- the
other unit-- ALWAYS IN TERMS OF THE OTHER THING)
◉ Chap 2--- this chapter is also not super important; mostly shows
the scientific method of economists and how use that same process.
Answer:
◉ Production Possibilities Curve (what is it, the layout, what does
slope represent, feasibility of points, and why PPFs are bowed out).
,Answer: * graphical representation of two goods and combos of
quantity of output that can be produced given inputs
* layout== two endpoints that show production of all on one good
and then one good per axis
* slope= opportunity cost of one good in terms of another (so like
y/x would give opp cost of good x)
* feasibility= points outside are not possible, inside are not not
efficient; points MOST EFFICIENT ON CURVE
* why bowed out= law of increasing app costs (as produce more of
one good app cost of good B goes up)
◉ Shifts to PPF (two ways).
Answer: 1. if have more technology ( say you have computers and
cars-- just the number of computers will go up so one endpoint will
be the same and other will move up but whole thing will move up)
2. Also due to more/ better FOP (land, labor, capital)
3. Better economy
◉ Micro vs. Macro.
Answer: Micro= how households and firms make decisions on
smaller scale
Macro= how all markets operate together combined w gov
, ◉ Chapter 3-- Gains from Trade-- this is an impt chapter-- comp adv,
specialization, op cost w comp adv..
Answer:
◉ Gains from trade.
Answer: * trade makes everyone better off
* even can produce two goods independently (using just two here to
simplify), trade allows you to specialize and be more efficient
◉ Absolute Advantage.
Answer: * what most ppl think of when think about who has an
advantage for trade
* if can produce more in same time period or produce same amount
in less
* someone can have an abs. adv. in both goods, but never a
comparative advantage in both and we use comp adv. for deciding
who should trade with whom
◉ Comparative Advantage ( relationship to opp cost in definition;
can someone not have one at all or have one in both?).
Answer: * relationship to opportunity cost-- whoever has the
LOWEST opportunity cost for a given product has the comparative
advantage in that good and should specialize in it and then get the
other good mostly from another person who specializes in that
