ECON 211 - Final Exam
1. Economics
Definition: - The study of how society manages its scarce resources. ---
2. Efficiency and Equity
Trade-off: - There is often a trade-off between efficiency and equity; society seeks to maximize the use of its
scarce resources while attempting to dis...
- ✅ The study of how society manages its scarce resources.
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2. Efficiency and Equity
Trade-off:
- ✅ There is often a trade-off between efficiency and equity; society seeks to maximize the use of its
scarce resources while attempting to distribute the benefits fairly among its members.
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3. Opportunity Cost of Going to College
Definition:
- ✅ The value of the best opportunity a student forfeits to attend college.
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4. Rational Decision Making
Criteria:
- ✅ A decision is considered rational when the marginal benefit is greater than the marginal cost.
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5. Incentive
,Understanding Behavior:
- ✅ Economists recognize that people respond to incentives.
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6. Invisible Hand
Concept:
- ✅ A term introduced by Adam Smith to describe the mechanism that transforms self-directed gains
into favorable market outcomes.
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7. Property Rights
Requirement for Functioning Markets:
- ✅ For markets to function effectively, there must be clear property rights.
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8. Market Failure
Definition:
- ✅ A scenario in which a market, left to its own devices, fails to allocate resources efficiently.
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9. Microeconomics
Focus:
- ✅ The study of how households and firms make decisions, along with their interactions in markets.
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, 10. Macroeconomics
Scope:
- ✅ The study of the overall economy, including subjects such as inflation, unemployment, and
economic growth.
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11. Example of Microeconomics
Specific Case:
- ✅ The impact of minimum wage laws on employment in the fast-food sector.
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12. Example of Macroeconomics
Specific Case:
- ✅ The effect of increased money supply on inflation rates.
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13. Benefits of Trade
- ✅ 1. Leads to a more efficient use of resources, allowing a country to consume beyond its production
possibility frontier.
- ✅ 2. Enables goods to be obtained at a lower opportunity cost.
- ✅ 3. Facilitates specialization in areas where individuals or nations have a comparative advantage.
- ✅ 4. Results in a greater variety of goods and services available.
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