Microeconomics Clep Prep

Front 1

Microeconomics

Back 1

The study of individual markets, how individual agents interact within those markets, and how individual economic agents make decisions.

Front 2

Macroeconomics

Back 2

The study of national and global economic activity

Front 3

What are the three types of economic systems?

Back 3

Laissez-faire capitalism,
Central Planned Economy (command economy),
Mixed Economy

Front 4

What is Laissez-faire capitalism?

Back 4

A pure market economy, government has little input.

Front 5

What is a command economy?

Back 5

Single or small group of individuals determine the allocation of resources

-Firms and households have little say.

Front 6

Describe a Mixed Economic system. (mixed economy)

Back 6

A combination of Laissez-faire Capitalism and a Central Planned Economy.

Example: China

Front 7

What are the two types of markets?

Back 7

-Goods Markets
-Factor Markets

Front 8

What are goods markets?

Back 8

A market where finished goods are exchanged.

Example: Soda, Pizza, Porsches

Front 9

What is a factor market?

Back 9

A market where things used to produce other goods and services are exchanged.

Example: Land, Labor, Capital

Front 10

Define Land from an economical standpoint.

Back 10

In economics Land comprises all naturally occurring resources whose supply is inherently fixed.

Examples: Mineral Deposits

Front 11

What is capital from an economic standpoint?

Back 11

Equipment and machinery used in production (used to create goods)

Front 12

What is Labor from an economic standpoint?

Back 12

The intellectual and manual human attributes (human resources)

Front 13

What questions does positive economics ask?

Back 13

What is.

Example: What is unemployment?

Front 14

What questions does normative economics ask?

Back 14

What it should be.

Example: What should the government do about unemployment?

Front 15

What is Positive Economics?

Back 15

Positive economics is the branch of economics that concerns the description and explanation of economic phenomena.It focuses on facts and cause-and-effect behavioral relationships and includes the development and testing of economics theories.

Front 16

What is Normative economics?

Back 16

Normative economics is that part of economics that expresses value judgments (normative judgements) about economic fairness or what the economy ought to be like or what goals of public policy ought to be.

Front 17

What three assumptions do all economic models have?

Back 17

1. Rationality
2. Preference
3. Local nonsatiation

Front 18

What does rationality mean economically?

Back 18

Agents do what is in their best interest given the information they have at the time of their decision.

Front 19

What does preference mean economically?

Back 19

Agents will prefer one choice to another, or have no preference.

Front 20

What does local nonsatiation mean economically?

Back 20

Within a certain range, agents prefer more of a good to less of a good.

Front 21

What does PPF stand for and what does it mean?

Back 21

Production Possibilities Frontier, which is the limit between what can and cannot be produced.

Front 22

What is absolute advantage?

Back 22

When one party can produce more of a good than another party.

Front 23

What is comparative advantage?

Back 23

When one party can produce a good at a lower opportunity cost than another party.

Front 24

What happens when the demand curve shifts to the right?

Back 24

1. Quantity produced is higher
2. Equilibrium point is higher
3. Price is higher

Front 25

What happens when price increases?

Back 25

-Supply increases
-Demand decreases

Front 26

What happens when price decreases?

Back 26

-Supply decreases
-Demand increases

Front 27

What is the supply schedule?

Back 27

represents the amount of some good that producers are willing and able to sell at various prices, assuming ceteris paribus, that is, assuming all determinants of supply other than the price of the good in question, such as technology and the prices of factors of production, remain the same.

Front 28

What is the demand schedule?

Back 28

represents the amount of some good that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, personal tastes, the price of substitute goods, and the price of complementary goods, remain the same.

Front 29

What does ceteris paribus mean?

Back 29

"all other things being equal."

Front 30

What is a positive externality?

Back 30

Benefits people who are not directly involved.

Front 31

What is a negative externality?

Back 31

Causes harm for people that are not directly involved.

Front 32

What is a positional externality?

Back 32

When one party attempts to "one-up" another party.