ECN-112 Exam 1| Ques ons and answers | Updated
RATED A+ | NEW
Economy
A system for coordina on society's produc ve ac vi es - ac vi es that create the goods and
services people want and get them to the people who want them
Economics
The social science that studies the produc on, distribu on and consump on of goods and
services
Command Economy
Decisions about what factories would produce and what goods would be delivered to
households were made by government officials. (Centralized decisions)
What are some examples of a command economy?
China's economy by late 1970s
Soviet Union's economy
North Korea's economy
Market Economy
Decisions about produc on and consump on are made by individual producers and consumers.
(Decentralized decisions and minimal government interven on)
What is an example of a Market Economy?
U.S. Economy
Microeconomics
The branch of economics that studies how individuals make decisions and how these decisions
interact
The invisible hand
The way in which the individual pursuit of self-interest can lead to good results for society as a
whole
Economic Growth
, The growing ability of the economy to produce goods and services
Sustainable long-term economic growth
Economic growth over me that balances protec on of the environment with improved living
standards for current and future genera ons
What are the four Principles of Individual Choice?
1) People must make choices because resources are scarce
2) The opportunity cost of an item - what you must give up in order to get it - is its true cost
3) "How much" decisions require making trade-offs at the margin: comparing the costs or
benefits of doing a li=le bit more of an ac vity vs. doing a li=le bit less
4) People usually respond to incen ves, exploi ng opportuni es to make themselves be=er off
Describe the first principle: Choices are necessary because resources are scarce
- Individuals have a choice of what to do and what not to do
- Anything that can be used to produce or something else (Land, Labor and Capital)
- When resources are scarce there is not enough of that resource
Describe the second principle: The True Cost of Something is its Opportunity Cost
This is when you have an opportunity cost or what we give up in order to get its true cost
If "you make $45,000 per year at your current job with Company A. You are considering a job
offer from Company B, that will pay you$50,000 per year. " what are the opportunity cost of
accep ng the new job at Company B?
The increased me spent commu ng to your new job
The $45,000 salary from your old job
Describe the third principle: "How Much" Is a Decision at the Margin
-There is a trade-off for when you compare cost to the benefit of the service or good
- These trade-offs come at marginal decision whether its a bit more or a bit less
Describe the fourth principle: People Usually Respond to Incen ves, Exploi ng Opportuni es to
Make Themselves Be=er Off
Incen ves are anything that will offer rewards to people that change behavior
What are the 5 Principles of the Interac on of Individual Choices?
5) There are gains from trade
6) Markets move toward equilibrium
RATED A+ | NEW
Economy
A system for coordina on society's produc ve ac vi es - ac vi es that create the goods and
services people want and get them to the people who want them
Economics
The social science that studies the produc on, distribu on and consump on of goods and
services
Command Economy
Decisions about what factories would produce and what goods would be delivered to
households were made by government officials. (Centralized decisions)
What are some examples of a command economy?
China's economy by late 1970s
Soviet Union's economy
North Korea's economy
Market Economy
Decisions about produc on and consump on are made by individual producers and consumers.
(Decentralized decisions and minimal government interven on)
What is an example of a Market Economy?
U.S. Economy
Microeconomics
The branch of economics that studies how individuals make decisions and how these decisions
interact
The invisible hand
The way in which the individual pursuit of self-interest can lead to good results for society as a
whole
Economic Growth
, The growing ability of the economy to produce goods and services
Sustainable long-term economic growth
Economic growth over me that balances protec on of the environment with improved living
standards for current and future genera ons
What are the four Principles of Individual Choice?
1) People must make choices because resources are scarce
2) The opportunity cost of an item - what you must give up in order to get it - is its true cost
3) "How much" decisions require making trade-offs at the margin: comparing the costs or
benefits of doing a li=le bit more of an ac vity vs. doing a li=le bit less
4) People usually respond to incen ves, exploi ng opportuni es to make themselves be=er off
Describe the first principle: Choices are necessary because resources are scarce
- Individuals have a choice of what to do and what not to do
- Anything that can be used to produce or something else (Land, Labor and Capital)
- When resources are scarce there is not enough of that resource
Describe the second principle: The True Cost of Something is its Opportunity Cost
This is when you have an opportunity cost or what we give up in order to get its true cost
If "you make $45,000 per year at your current job with Company A. You are considering a job
offer from Company B, that will pay you$50,000 per year. " what are the opportunity cost of
accep ng the new job at Company B?
The increased me spent commu ng to your new job
The $45,000 salary from your old job
Describe the third principle: "How Much" Is a Decision at the Margin
-There is a trade-off for when you compare cost to the benefit of the service or good
- These trade-offs come at marginal decision whether its a bit more or a bit less
Describe the fourth principle: People Usually Respond to Incen ves, Exploi ng Opportuni es to
Make Themselves Be=er Off
Incen ves are anything that will offer rewards to people that change behavior
What are the 5 Principles of the Interac on of Individual Choices?
5) There are gains from trade
6) Markets move toward equilibrium
