Essay Preview: Economics
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Study Guide ¬†#1 ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬†Econ 202 ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† Summer 2016What is the Law of Tannstafal? ¬†Explain it‚Äôs meaning.¬†It is the cost of decision making it explains the idea that sometimes a thing may seem free but there is always cost. ‚ÄúPROFIT‚ÄĚDefine ‚ÄėEconomics‚ÄĚ and explain the meaning of the ‚ÄėInstitutional Structure‚Äô Economics deals with limited resources and unlimited wants and maximize which is ‚Äúprofit.‚Ä̬†Institutional structure means any structure or mechanism of social order governing the behavior of a set of individuals within a given communityWhat are the two aspects of scarcity?¬†Limited resources and Unlimited wantsDescribe the coordination problems of the economy and relate them to the concept of ‚Äėeconomic efficiency‚Äô. ¬†Coordination problems are: what to produce? How to produce? For whom to produce?When limited resources produces the most valuable combination of outputs possible. Name the scarce resources and describe the payments for each resource.Land: rentLabor: wagesCapital: interest Entrepreneurship: profitDefine and describe‚Äô opportunity cost‚Äô.¬†The value of the best alternative given up when u choose. Describe how consumers make ‚Äėrational decisions.‚ÄĚ (economic reasoning)¬†Based on the calculation of cost and benefits.Define a production possibilities table and production possibilities curve. Table: is the maximum combinations and cost of each choice. Curve: Is the maximum combination of outputs that can be obtained with a given number of inputs. What are the assumptions of the PPC? Describe each one.Only two goods can be producedFull employment of resourcesFixed resourcesFixed technology Clearly understand the meaning of a point on the PPC, inside the PPC and outside the PPC. a. on PPC means maximum combination outputs that can be obtained with given number¬†b. inside PPC means unemployment, not fully inefficiently using all resources¬†c. outside PPC means unattainable at individual level, in macro countries need to trade with other countriesDescribe the factors that push the PPC outwards. Technological advances, mainlyexpanding the resource base,international trade.Explain the shape of the real-world PPC. MACROThe shape of the real world PPC would be a line curving outwards. The line curves because because some economies are better at producing one thing than another.Explain when and why you would have a straight-line PPC with a negative slope.The only time we would be able to have a straight line PPC with a negative slope would be in a¬†1. Micro economy,¬†2. With similar resources3. If they were producing similar products.Describe the conditions that are necessary to maximize world output.The conditions necessary would have to be trading with a nation that has a better comparative advantage in something that they are not good in producing.. Cooperative production/division of labor. Specialized production and exchange according to comparative advantageDefine economic efficiency and describe each type of efficiency.Economic efficiency: when a given amount of resources produces the most valuable combination of outputs possible.Allocative efficiency: the use of resources to produce what people want. Productive efficiency: producing a given output at the lowest possible cost.Distributive efficiency: distributing the production as evenly as possible.Compare the features of Capitalism and Socialism.¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬†Capitalism ¬† ¬† ¬† ¬† socialism Ownership ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬† ¬†Private ¬† ¬† ¬† ¬† ¬† ¬† ¬† PublicIncome distribution ¬† ¬† unequal ¬† ¬† ¬† ¬† ¬† ¬† equalSocial values ¬† ¬† ¬† ¬† ¬† ¬† ¬† Individualism ¬† ¬†collectivism What are the functions of price?Rational device

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