Econ 203 - Midterm review || with Accurate Answers 100%.
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Econ 203
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Econ 203
Economics is the study of... correct answers -individual decision making
-organization/allocation of resources
-strategic interaction
material prosperity and development/growth (wealth,GDP)
Economic issues of market interactions and allocations correct answers -how should people decide what a...
Econ 203 - Midterm review || with Accurate Answers 100%.
Economics is the study of... correct answers -individual decision making
-organization/allocation of resources
-strategic interaction
material prosperity and development/growth (wealth,GDP)
Economic issues of market interactions and allocations correct answers -how should people
decide what and how much to buy of a goos
-how should firms decide how much to produce and how many inputs to use (i.e. employment)
-how should people make time/education choices
Economic issues of the environment correct answers -climate change
-development of energy resources (oil sands, renewables)
-carbon taxes
Economic issues of health correct answers -health spending and preventative medicine
-public services
-the opioid crisis
Economic issues of crime correct answers -relationship between education and crime
-optimal deterrence
Scarcity correct answers The limited nature of society's resources
Economics correct answers The study of how society manages its scarce resources
People face trade-offs correct answers Choosing something necessitates not choosing something
else
Efficiency correct answers The property of society getting the maximum benefits from its scarce
resources
Equity correct answers The property of distributing economic prosperity fairly among the
members of society
Opportunity cost/financial cost of an item correct answers The cost of something is what you
give up to get it
Rational people think at the margin correct answers Goal driven (self-interested preferences),
complete preferences (compare any two options to say which they prefer of that they're
indifferent), and transitive preferences (option 1 preferred to 2, 2 to 3, then 1 is preferred to 3)
Rational People correct answers People who systematically and purposefully do the best they can
to achieve their objectives
,Marginal Changes correct answers Small incremental adjustments to a plan of action (Forward
looking, lost watch problem-sunk costs)
People respond to incentives. An incentive is something that induces someone to act. correct
answers -prices induce people to buy or not buy certain goods
-wages encourage people to work
-fines encourage people to behave in certain ways
-social norms induce people to behave in certain ways
morals induce individuals to act in particular ways
Trade can make everyone better off correct answers If people have different valuations over the
same "good" (an item, skills, time) then exchanging can make both people better off.
Property rights correct answers The ability of an individual to own and exercise control over
scarce resources.
Specialization of labour correct answers The specialization of individual workers in the
production of particular goods or services
Market economy correct answers Allocates resources through the decentralized decisions of
households and firms as they interact in markets for goods and services
Markets can be a good way to organize economic activity; however... correct answers
Individuals and governments don't know the private valuations of other individuals
Governments can sometimes improve market outcomes correct answers -role of government
-legal (enforcing property rights), corruption and crime
-institutions (maintaining markets, property rights)
-markets may lead to undesirable consequences
Reasons for government intervention: correct answers -efficiency: making sure we're getting the
most out of available resources
-equity: focusing on distribution of resources/opportunities
-market failure: a situation in which a market left on its own fails to allocate resources
efficiently. (healthcare, climate change)
-externality: the impact of one person's actions on the well-being of a bystander (education,
smoking)
-the goal of equity: even when the invisible hand is yielding efficient outcomes, it can
nonetheless leave sizeable disparities in economic well-being
Standard of living depends on... correct answers The country's ability to produce goods and
services
Productivity correct answers The quantity of goods and services produced from each hour of a
worker's time
-depends on technology employed in production
, -depends on productivity (education, human capital) of individuals (workers) in the economy
(health, education)
When the government prints too much money correct answers Prices rise
Inflation correct answers increase in overall price level within an economy
Deflation correct answers decrease in overall price level within an economy
What causes inflation? correct answers Real versus nominal prices
Society faces a short-run trade-off between inflation and unemployment correct answers With
inflation, prices and wages rise, reducing employment in the short-run
Business cycle correct answers irregular and (largely) unpredictable fluctuations in economic
activity measured by production of goods and services or number of people employed
How do economists approach the world and analyzing problems? correct answers Preferences,
incentives, resources, opportunity costs (valuations)
Behavioural and technical assumptions correct answers -Simplifies complexity of world, making
it easier to understand
-Art of scientific thinking is deciding which assumptions to make
-Hypothesis testing: if rejecting hypothesis, what assumptions are wrong
Economic Models correct answers -economists use models (diagrams and equations) to
understand the world and develop hypothesis
-by necessity, economic models omit details, allowing us to focus on important conditions
-all models are built on underlying assumptions
Circular-Flow diagram correct answers A visual model of the economy showing how dollars
flow through markets among households and firms
Production possibilities frontier correct answers Combinations of output that the economy can
possibly produce given available technology and resources
Positive statements correct answers statements describing the world as it is.
-observation, empirical, based on objective data
Normative statements correct answers statements prescribing how the world should be
-policy, based on subjective beliefs/preferences
Economic debates are often the result of correct answers 1. Disagreement about the validity of
alternative positive theories about how the world works
2. Differences in values/preferences and different normative views about what a policy should
try to accomplish
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