Agecon Part 2 Study

Front 1

concerned with decision-making by individual economic agents such as firms and consumers

Back 1

Microeconomics

Front 2

increasing product differentiation and encouraging brand loyalty advertising may make consumers less price sensitive, moving the market further from perfect competition towards imperfect competition (see monopolistic competition) and increasing the ability of firms to charge more than marginal cost. Heavy spending on advertising may also create a barrier to entry.

Back 2

Why do firms advertise? Even when goods are interchangeable?

Front 3

Is economics value free? Name 2 value decisions might economics make about what is important? e.g. XX is preferred to XX

Back 3

Individual utility maximization versus social betterment Efficiency versus fairness More is preferred to less

Front 4

Is economics goal free? What are the goals might economics seek to achieve?

Back 4

Economic efficiency Economic growth Economic freedom, Economic security Equitable distribution of income Full employment Price level stability

Reasonable balance of trade

Front 5

What is the fundamental problem of economics as a discipline?

Back 5

The allocation of resources among competing wants because there are unlimited wants limited resources .

Front 6

What characterizes a laissez faire approach to economics? (select all that apply)

Back 6

Government hands-off

Markets relied-upon to perform allocations

Front 7

What characterizes a command economy (select all that apply)

Back 7

Government makes the decisions

Decisions enforced with force of law (and sometimes martial force

Front 8

Name three functions of money

Back 8

medium of exchange

Store of value measure of worth

Front 9

What is a market?

Back 9

A market is nothing more or less than the locus of exchange; it is not necessarily a place, but simply buyers and sellers coming together for transactions.

Front 10

What is MACRO-economics?

Back 10

Macroeconomics can be thought of as the “big picture” of economics. It focuses on aggregate production and consumption in an economy.

Front 11

Topics that macroeconomists might study include: ,

Back 11

Effects of general taxes such as income and sales taxes on output and prices.

Causes of economic upswings and downturns.

Effects of monetary and fiscal policy on economic health.

Effects of and process for determining interest rates.

Causes for some economies growing faster than others.

Front 12

With what kinds of topics does macroeconomics concern itself?

Back 12

e. Aggregate economic phenomena like the rate of unemployment and inflation.

Front 13

Outline the difference between positive and normative questions?

Back 13

Positive economics focuses on the description, quantification, and explanation of economic developments, expectations, and associated phenomena. It relies on objective data analysis, fact-based (precise, descriptive and clearly measurable) and associated figures.

Normative economics focuses on the ideological, opinion-oriented, prescriptive, value judgments, and "what should be" statements aimed toward economic development, investment projects, and scenarios. Its goal is to summarize people's desirability (or the lack thereof) to various economic developments, situations, and programs by asking or quoting what should happen or what ought to be.

Front 14

An example of a positive economic statement:

Back 14

"Government-provided healthcare increases public expenditures."

Front 15

An example of normative economic statement:

Back 15

"The government should provide basic healthcare to all citizens."

Front 16

Which of the following is an example of a normative question?

Back 16

Is the goal of sustainability of greater importance than the goal of economic growth as we move into the 21st century?

Front 17

Define output and income

Back 17

Output and Income are usually considered equivalent and the two terms are often used interchangeably. Output can be measured as total income, or, it can be viewed from the production side and measured as the total value of final goods and services or the sum of all value added in the economy

Front 18

What is national output

Back 18

is the total value of everything a country produces in a given time period.

Front 19

Which of the following best describes the precautionary principle?

Back 19

We should err on the side of caution when dealing with natural systems or human health.

Front 20

Define unemployment and how it is expressed in most countries

Back 20

Percentage of total workforce who are unemployed and are actively seeking a paid job. Unemployment rate (# of unemployed / # in labor force) = % Unemployment rate is one of the most closely watched statistics because a rising rate is seen as a sign of weakening economy that may call for cut in interest rate. A falling rate, similarly, indicates a growing economy which is usually accompanied by higher inflation rate and may call for increase interest rate.

Front 21

How is labor productivity defined?

Back 21

The level of output produced per worker (or worker-hour).

Front 22

Define inflation and deflation? And what causes it?

Back 22

Inflation (general price increase across the entire economy) occurs when an economy becomes overheated and grows too quickly. Inflation can lead to increased uncertainty and other negative consequence.

declining economy can lead to deflation, or a rapid decrease in prices. Deflation can lower economic output. Central bankers try to stabilize prices to protect economies from the negative consequences of price changes.

Front 23

Inflation can lead to increased uncertainty and other negative consequences.

Back 23

Cuts in interest rates, Increased money supply, Higher wages, Devaluation (imports become more expensive), Declining productivity , Increase in VAT taxes, Inflation expectations/speculations, Increased property prices (not a cause but closely related),

Front 24

What % of inflation constitutes hyperinflation?

Back 24

200 % within a year

Front 25

What is the law of demand?

Back 25

As price increases consumers will purchase less of the specific commodity.

As price decreases consumers will purchase more of the specific commodity

Front 26

What is the law of supply?

Back 26

The law of supply is that producers will supply more the higher the price of the commodity.

Front 27

What factors might cause an exogenous increase in supply

Back 27

Climatic Condition

Front 28

What is market equilibrium? Explain or draw on graph

Back 28

occurs in a market when the quantity demanded by buyers equals the quantity supplied by sellers. This is a point of balance in the market where there is no excess supply or demand.

Front 29

Define the Price Elasticity of Demand.

Back 29

The responsiveness of quantities demanded to changes in prices.

Front 30

What problems are we most likely to see at which stage of the business cycle?

Back 30

High unemployment during recession

Front 31

Define opportunity cost

Back 31

Opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action (foregone profit).

Front 32

Direct Taxes is ...

Back 32

Is the tax the government collects directly from the people. These taxes are based on ownership or existence. Direct taxes refers to any levy that is both imposed and collected on a specific group or people or organisations (eg: income taxes)

Front 33

What is indirect tax ?

Back 33

Is the tax whixh is levied on one and passed onto others. They are collected from someone or some organisation other than the person or entity that would normally be responsible for the taxes (eg: sales tax).

Front 34

Define “excess supply” and “excess demand” with respect to price.

Back 34

• Excess supply (consumers surplus) is the situation where the price is above its equilibrium price. The quantity willing supplied by the producers is higher than the quantity demanded by the consumers (decrease inflation) • Excess demand is the situation where the price is below its equilibrium price. The quantity supplied is lower than the quantity demanded by the consumers (increase inflation).

Front 35

Define “invisible hand"

Back 35

The invisible hand is a metaphor that characterizes the mechanisms through which beneficial social and economic outcomes may arise from the accumulated self-interested actions of individuals, none of whom intends to bring about such outcomes

Front 36

Which of the following can be derived from other assumptions of economics?

Back 36

Trades off and opportunity cost

Front 37

True or False. The additional cost to a producer of hiring an additional unit of labor is called the marginal cost.

Back 37

True

Front 38

refers to the increase in total cost of production as a result of producing one more unit of output .

Back 38

Marginal cost

Front 39

is a maximum amount a consumer is willing to pay for an additional good or service.

Back 39

Marginal benefits

Front 40

True or False. Monetarists believe the government should use monetary policy to boost aggregate demand during a recession.

Back 40

False • Monetarists argued that governments should focus on keeping the money supply steady, even in a recession when unemployment was high

Front 41

What is the current measure of growth?

Back 41

% change in GDP (Gross Domestic Profit)

Front 42

Name a good that is price inelastic (in a western context)

Back 42

Inelastic goods are water, electricity, phone service, and gasoline

Front 43

Name a good that is price elastic (in a western context)

Back 43

Examples of elastic products are coffee, airline tickets, and stocks.

Front 44

What best describes Economies of Scale?

Back 44

Relates to the cost advantages obtained from a company becoming large.

Front 45

What characterizes an oligopoly?

Back 45

very few number of sellers,

often collude,

often price leadership,

entry difficult, non-price competition,

product differentiation.

Front 46

What characterizes a pure monopoly. Give an example of what this might look like.

Back 46

one seller,

price giver,

entry & exit blocked,

unique product,

non-price competition.

Front 47

pure competition

Back 47

atomized competition,

price taker,

freedom of entry & exit,

no nonprice competition,

standardized product

Front 48

Compare nominal and real wages, which is true?

Back 48

Nominal wages are money wages and real wages are adjusted for the cost of living. Real wages are money wages and nominal wages are adjusted for the cost of living.

Front 49

How have economists traditionally defined “economic growth,” and how is that different from “living standards growth”?

Back 49

Economists have traditionally defined economic growth in terms of production of goods and services,

whereas the concept of “living standards growth” encompasses the improvement in the quality of diet and housing, transportation and communication, health care, education, working conditions, entertainment, and even political freedom and social inclusion.

Front 50

What is aggregate supply?

Back 50

The sum total of all goods and service firms and governments are willing and able to produce at any level

(aggregate supply)

Front 51

What is aggregate demand?

Back 51

The sum total of all domestic goods and services that consumers want to buy at any given price level.

Front 52

What happens when you increase the supply of money in a country?

Back 52

Decreases interest rates, increases consumption and investment, and increases aggregate demand.