Peregrine Exam Macroeconomics Review
Macroeconomics - ANS -the study of the economy as a whole, including topics such as
inflation, unemployment, and economic growth
Microeconomics - ANS -The study of how individuals and firms make choices, how they interact
in markets, and how the government attempts to influence their choices to manage costs and
spend money in a competitive environment.
Production Possibilities Frontier Curve (PPF) - ANS -A curve used to discover the mix of
products that will use available resources most efficiently
Assumptions of the PPF - ANS -1. Technology is fixed
2. Resources are fixed
3. Resources are used at their fullest
What does a PPF curve show? - ANS -- It illustrates the varying amounts of two products that
can be produced when both depend on the same finite resources
- It measures two goods or services for each country
What is the optimal position on a PPF curve? - ANS -A, B, and C on the PPF curve represent
the most efficient uses of resources by the economy, according to the PPF
Opportunity Cost - ANS -Cost of the next best alternative use of money, time, or resources
when one choice is made rather than another
Constant Opportunity Cost - ANS -- An opportunity cost that remains the same as consumers
shift purchases from one product to another along a straight-line budget line.
- Linear PPF Curve
Increasing Opportunity Cost - ANS -- The opportunity cost of producing additional units of a
good rises as society produces more of that good
- Non-Linear PPF Curve
Specialization - ANS -The process of an organization concentrating its labor and resources on
a certain type of production to be more efficient and create a comparative advantage for an
economy
Three Elements of Specialization - ANS -- Repetition
- Continuity
- Innovation
, Repetition - ANS -Doing one task over and over makes you better at it
Continuity - ANS -Focusing on one task saves time and money which leads to efficiency
Innovation - ANS -Perfecting a task creates ideas on ways to improve it
The following is an example of...
People Naturally Specialize - ANS -Division of Labor
Lowering costs to make goods results in... - ANS -People saving time and money
More competitive Economies lead to... - ANS -Wealthier societies
Comparative Advantage - ANS -An economy's ability to produce a particular good or service at
a lower opportunity cost than its trading partners
Self-Sufficiency - ANS -The ability of individuals and families to maintain sufficient income to
consistently meet their basic needs
Per-Unit Opportunity Cost - ANS -= Opportunity Cost / Units Gained
Marginal Gains - ANS -= Change in Total Gains / Change in Quantity
Small incremental improvements in any process that add up to a significant improvement when
combined together
Total Gains - ANS -The sum of consumer surplus and producer profits or, more roughly, the
increased output from specialization in production with resulting trade.
Law of Diminishing Marginal Productivity - ANS -It states that advantages gained from slight
improvement on the input side of the production equation will only advance marginally per unit
and may level off or even decrease after a specific point
Law of Supply - ANS -Positive slope relationship between quantity (x-axis) and price (y-axis)
Law of Demand - ANS -Negative slope relationship between quantity (x-axis) and price (y-axis)
Equilibrium Point - ANS -supply = demand
Demand Determinants - ANS -- Price of related goods
- Income
- Number of buyers
- Taste preference
Macroeconomics - ANS -the study of the economy as a whole, including topics such as
inflation, unemployment, and economic growth
Microeconomics - ANS -The study of how individuals and firms make choices, how they interact
in markets, and how the government attempts to influence their choices to manage costs and
spend money in a competitive environment.
Production Possibilities Frontier Curve (PPF) - ANS -A curve used to discover the mix of
products that will use available resources most efficiently
Assumptions of the PPF - ANS -1. Technology is fixed
2. Resources are fixed
3. Resources are used at their fullest
What does a PPF curve show? - ANS -- It illustrates the varying amounts of two products that
can be produced when both depend on the same finite resources
- It measures two goods or services for each country
What is the optimal position on a PPF curve? - ANS -A, B, and C on the PPF curve represent
the most efficient uses of resources by the economy, according to the PPF
Opportunity Cost - ANS -Cost of the next best alternative use of money, time, or resources
when one choice is made rather than another
Constant Opportunity Cost - ANS -- An opportunity cost that remains the same as consumers
shift purchases from one product to another along a straight-line budget line.
- Linear PPF Curve
Increasing Opportunity Cost - ANS -- The opportunity cost of producing additional units of a
good rises as society produces more of that good
- Non-Linear PPF Curve
Specialization - ANS -The process of an organization concentrating its labor and resources on
a certain type of production to be more efficient and create a comparative advantage for an
economy
Three Elements of Specialization - ANS -- Repetition
- Continuity
- Innovation
, Repetition - ANS -Doing one task over and over makes you better at it
Continuity - ANS -Focusing on one task saves time and money which leads to efficiency
Innovation - ANS -Perfecting a task creates ideas on ways to improve it
The following is an example of...
People Naturally Specialize - ANS -Division of Labor
Lowering costs to make goods results in... - ANS -People saving time and money
More competitive Economies lead to... - ANS -Wealthier societies
Comparative Advantage - ANS -An economy's ability to produce a particular good or service at
a lower opportunity cost than its trading partners
Self-Sufficiency - ANS -The ability of individuals and families to maintain sufficient income to
consistently meet their basic needs
Per-Unit Opportunity Cost - ANS -= Opportunity Cost / Units Gained
Marginal Gains - ANS -= Change in Total Gains / Change in Quantity
Small incremental improvements in any process that add up to a significant improvement when
combined together
Total Gains - ANS -The sum of consumer surplus and producer profits or, more roughly, the
increased output from specialization in production with resulting trade.
Law of Diminishing Marginal Productivity - ANS -It states that advantages gained from slight
improvement on the input side of the production equation will only advance marginally per unit
and may level off or even decrease after a specific point
Law of Supply - ANS -Positive slope relationship between quantity (x-axis) and price (y-axis)
Law of Demand - ANS -Negative slope relationship between quantity (x-axis) and price (y-axis)
Equilibrium Point - ANS -supply = demand
Demand Determinants - ANS -- Price of related goods
- Income
- Number of buyers
- Taste preference
