Exam (elaborations)
FSU Hammock-s MICROECONOMICS Final (1)
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FSU Hammock-s MICROECONOMICS Final (1)
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FSU Hammock's MICROECONOMICS FinalEconomics - ANS-the study of how people use limited resources to satisfy unlimited wants
Scarcity - ANS-stuff is limited
Choice - ANS-implied by scarcity
Opportunity Cost - ANS-Value of the best thing given up
Rational self interest assumption is - ANS-false, but useful
Ceteris paribus - ANS-other things equal
Positive Economics - ANS-the way the world actually is
Normative economics - ANS-the way the world ought to be
Comparative advantage - ANS-Lowest opportunity cost
What are the four benefits to trade? - ANS-1) Increased variety of goods
2)Increased competition
3)Technology transfer
4)more efficient large scale production
Dollars that leave the country always come back as either... - ANS-US exports or investments in
the us
Factors that effect demand: - ANS-price, income, what you already have, prices of similar
goods, etc.
Law of demand - ANS-as prices rise, quantity demanded falls; negative relationship; not rly a
law
Height of demand curve - ANS-willingness to pay for a unit of the good; WTP falls as we
consume more; think of the banana eating game
Diminishing marginal utility - ANS-shrinking additional enjoyment; as we consume more of
something, we get less enjoyment from additional units
Consumer surplus (and where is it on a graph?) - ANS-the difference between what a consumer
is willing to pay, and what the consumer actually pays
, Market demand - ANS-the horizontal sum of individual demand curves
Change in demand v change in quantity demand - ANS-a change in the price of a good does
not change demand for that good. It changes quantity demanded
Things that can shift demand (5) - ANS-1) tastes and preferences
2)changes in quality of goods (due to technology)
3)changes in prices of substitutes and complements
4)natural disasters
5) changes in income (normal and inferior goods)
Relationship between income and normal goods - ANS-As income rises, demand for normal
goods rises
Relationship between income and inferior goods - ANS-As income rises, demand for inferior
goods fall
Supply - ANS-a positive relationship bw price and quantity supplied (produced)
The Law of Supply - ANS-as price rises, quantity supplied rises
Height of supply curve - ANS-marginal cost of producing those additional units = the opportunity
cost of the resources used to produce the marginal unit of output = minimum amount a firm
must be paid to be persuaded to produce a unit of output
Producer surplus - ANS-the difference bw the price at which a good is sold and its marginal
cost, eventually turns into consumer surplus
Market supply - ANS-the horizontal sum of individual supply curves
Change in supply vs. change in quantity supplied - ANS-- change in quantity moves along same
curve
- change in supply shifts whole curve
Things that can shift supply - ANS-1) changes in technology
2)availability (price) of inputs
3)war/natural disasters/other political events,
4)taxes and subsidies
5)changes in expectations
6)changes in regulation
Price above equilibrium price is... (shortage or surplus?) - ANS-surplus
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