M I C R O E C O N O M I C S

1. MICROECONOMICS APEXAM REVIEW

2. Define Economics

3. A Social Science which studies how people respond to the Unlimited Wants – LimitedResourceDilemma

4. DefineOpportunity Cost

5. The amount of other products forgone in order to produce a given product

6. Economists make the assumption that we act in a way that maximizes our utility. This is referred to by them as “____________ Self Interest”

7. Rational Self Interest

8. Define MarginalAnalysis

9. Comparing Remember This Formula: MB = MC Marginal Benefit to Marginal Cost

10. Why might your Marginal Analysis yield a completely different result than my Marginal Analysis?

11. Because the utility you receive will not necessarily match the utility I receive from the very same good or service

12. Define this term: MARGINAL

13. EXTRA ADDITIONAL CHANGE IN

14. Ceteris Paribus refers to an assumption Economists must make to study their theories. What does it mean?

15. All Other Things Being Equal

16. Statements which are Facts Cause and Effect Descriptive and Have No Value Judgment are referred to as “___ ___”

17. POSITIVE ECONOMICS

18. The use of ALL AVAILABLE RESOURCES is the definition of “___ ___”

19. FULL EMPLOYMENT

20. Define Productive Efficiency

21. The production of a mix of goods and services at the lowest possible cost

22. What Formula indicates Productive Efficiency?

23. P = Minimum ATC

24. Explain what this is and what the given curve and points stand for. B A

25. This is a PPF Curve The curve represents the full employment of resources and the various possible combinations of two goods or types of goods. Point A is Inefficient Use Of Resources and Point B is Unobtainable At This Time Production Possibilities Frontier Capital Goods B A Consumer Goods

26. Look at the Opportunity Cost Of Producing Y. What is the cost of changing the number of Y produced from C to D? Y D C B A X EF G H I

27. The Production ofXfalls from FtoE Y D C B A X EF G H I

28. Name The Law The Opportunity Cost of Each Additional Unit is Greater than the Cost of the Preceding One

29. The Law OfIncreasingOpportunity Cost

30. Why does the cost of producing “the next good” increase with additional production of that good?

31. Because the resources used first are more suited for that good than those used on subsequent goods

32. Name 4 things that make the PPF Curve shift IN or OUT

33. Δin resourceQUALITY Δin resource QUANTITY Δ inTECHNOLOGY Δin theINFRASTRUCTURE

34. Statements Which Contain Words Like Should or Ought To or that support specific policies are referred to as “___ ___”

35. NORMATIVE ECONOMICS

36. What is Allocative Efficiency?

37. Allocative Efficiency is the least costly production of the particular mix of goods and services most wanted by society

38. So what is the Economic Term That means that you are producing with both Productive and Allocative Efficiency?

39. FULL PRODUCTION

40. Using a PPF, demonstrate how a society can use its resources in a way that results in economic growth!

41. By using more of their resourcesfor Capital on PPF1 they can move out to PPF2 Capital Goods Consumer Goods PPF1 PPF2

42. How do economists measure the satisfaction we derive from the consumption of a good or service?

43. UTILS

44. Draw a basic “four box” Circular Flow Chart

45. And The Answer Is… Resource Market Costs WRIP Resources Land, Labor, Capital, and Entrepreneurial Ability Businesses Households Goods and Services Goods and Services Consumption Expenditures Revenue Product Market

47. Who should grow what? Avocados 90 60 U.S.A. Mexico 15 30 Soybeans

48. Avocados : Mexico Soybeans : U.S.A. Avocados 90 60 U.S.A. Mexico 15 30 Soybeans

49. Fair Terms of Trade? Avocados 90 60 U.S.A. Mexico 15 30 Soybeans

50. 1 Soybean : 3.5 Avocados Avocados 90 60 U.S.A. Mexico 15 30 Soybeans