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Scarcity
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The goods available are too few to satisfy individual's desires.
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Economic Reasoning
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Making decisions on the basis of costs and benefits.
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Marginal Cost
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The additional cost to you over and above the costs you have already incurred
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Sunk Cost
answer
Costs that you have already incurred and are not able to get back.
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Marginal Benefit
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The additional benefit above what you've already derived.
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Opportunity Cost
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The benefit that you might hace gained from choosing the next best alternative.
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Economics
answer
The study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customes, and political realities of society.
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Economic Forces
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The necessary reactions to scarcity. They must be rationed in some fashion.
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Market Force
answer
The economic force that is given relatively free rein by society to work through the market.
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Economic Reality
Economic, social and cultural, political and legal forces
Economic, social and cultural, political and legal forces
answer
What three forces control economic scarcity?
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Economic Forces
answer
This force is operative
Invisible Hand
The desire to make money
Invisible Hand
The desire to make money
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Invisible Hand Theorem
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The price mechanism, the rise and fall of prices that guides our actions in a market. This will tend to allocate resources efficiently.
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Efficiency
answer
Achieving a goal as cheaply as possible.
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Microeconomics
answer
The study of individual choice and how is influenced by economic forces.
Production/Consumption
Efficient way to do it -> Profit
Production/Consumption
Efficient way to do it -> Profit
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Macroeconomics
answer
The study of the economy as a whole. It considers inflation, unemployment, business cycles, and economic growth.
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Positive Economics
answer
The study of what is and how the economy works. - Relationships-
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Normative Economics
answer
The study of what the goals of the economy should be.
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Art of Economics
answer
The application of the knowledge learned in positive economics to the achievement of the goals determined in normative economics.
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4 Ways to Spend Money
answer
1. Your money on yourself (best)
2. Your money on another
3. Other's money on yourself
4. Other's money on another (worst)
2. Your money on another
3. Other's money on yourself
4. Other's money on another (worst)
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Value
answer
Cost is to Price, as
Benefit is to ______.
Benefit is to ______.
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Price
answer
Benefit is to Value,
as Cost is to ______.
as Cost is to ______.
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Reasons to Study Economics
answer
a. Efficient production (profit)
b. Decision marketing strategy (price)
c. Markets Extreme (competitiveness)
d. Tax Effects
b. Decision marketing strategy (price)
c. Markets Extreme (competitiveness)
d. Tax Effects
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Arthur Laffer
answer
1. Curve of tax revenue vs tax rate
2. As some individuals will work less to receive subsidies, we need to increase taxes, so they will work more.
3. The rich will work less to pay less taxes.
2. As some individuals will work less to receive subsidies, we need to increase taxes, so they will work more.
3. The rich will work less to pay less taxes.
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Price Discrimination
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Charging different prices for different consumers.
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Reservation Wage
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Minimum wage at which an agent will accept unemployment. Managers will have to compete with workers. Us, we are also competing with other gov't paid jobs.
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Maximum and Minimum Dilema
answer
If Health Care was for people who work for less than 30 hours, people who work more than 30 will work less to be included in Obamacare.
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Adam Smith
answer
Father of Modern Economics
Because of self-interest, society will be better off, so individuals should be left alone for them to act.
Because of self-interest, society will be better off, so individuals should be left alone for them to act.
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Free Trade
answer
Short Run - Keynesian
John Maynard Keynes
John Maynard Keynes
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Fair Trade
answer
Long Run - Classical
Joseph Stighitz
Joseph Stighitz
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Safety Net
answer
Unemployment benefits from countries.
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Factors of Production
answer
Land, Labor, Kapital, Entrepreneurship
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Efficient Production
answer
Output (up) / Input
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Price/Cost and Value/Benefit
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1. What you pay
2. What you receive
2. What you receive
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Transparency
answer
If prices are not available, less competition. Less of ___?
Prices increase or decrease?
Prices increase or decrease?
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Price
answer
Is a signal for buyers to buy or not and key in determining what will and will not get produced.
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Globalization and Efficiency
answer
Reason why countries increase____ is to become more _____.
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Thai Farmers Begin Deserting Government Over Late Rice Payments
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The government has been buying up rice from farmers at about 50% above market prices to boost rural incomes. The government was unable to pay.
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Voluntary
answer
In a free market, the transaction is ________, if not then the trade will not take place.
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Economic Freedom
answer
Human and Political Freedom cannot exist without a large measure of __________.
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Hong Kong's Government Key Roles
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Easy taxes, contracts enforced, no government intervention.
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Milton Friedman's Government
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Framework and Rules
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1. Free Market
2. Inefficient
3. (Subsidy, Taxes)
4. Rules, Regulations, Red Tape
2. Inefficient
3. (Subsidy, Taxes)
4. Rules, Regulations, Red Tape
answer
The goal is ___1___ and hence any intervention from government will be deemed ___2___. From this approach when a government is intervening __3__ it will create the 3 R's. __4__
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Price
answer
Coordinates people's action in a free market
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Tarrifs
answer
This increases domestically produced goods and protects domestic industries.
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Subsidy Discourages
answer
Modernization, innovation, and efficiency. Supply increases
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Opportunity Cost
Substitution Effect
Income
Substitution Effect
Income
answer
1. If decide not to supple, it costs more to producers to decide not to supply.
2. Don's case of consuming more leisure.
3. Money is not important.
2. Don's case of consuming more leisure.
3. Money is not important.
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Should " sunk cost" be considered whether to continue a project or not?
answer
No, _____ should not be considered from a marginal cost and marginal benefit analysis.
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What is NIMBY?
answer
Not In My Back Yard. This refers to society wanting/needing more things so long as it's not in their backyard. It is hard for an economy to solve the coordination problem
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What is opportunity cost?
answer
Choosing between 2 activities, one can only do one and not the other. The opportunity cost of doing activity A (say watching a movie at home) is not being able to do activity B (say studying for your exam).
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Do you think the role that social and political forces play in an economy enhances or detracts from economic progress?
answer
Social and political laws that prohibits economic efficiency to exist generally detracts economic progress. This is in a general economic sense.
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Deflation
answer
Prices are expected to go down and down. Spending, sales, hiring, goes down. Inventory goes up, as it decreases its value.
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Why Common Currency
answer
To take away the cost of transaction and increases trade
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Oil's Drop and Economic Fears in Europe Hammer Stocks
answer
Deflation occurred and the ECB is unable to hit their 2% inflation rate
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Brinkmanship Returns to the Eurozone
answer
Greece gets kicked out. You are only as strong as your weakest link. Greece to be better, decrease their budget deficit.
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Easier to Pay Debt
answer
If inflation occurs
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Mercedes-Benz Moving U.S. Headquarters to Atlanta
answer
Corporate taxes go down, low union membership, decrease tax liability.
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Every ECONOMY must solve 3 main coordination problems
answer
What and how much to produce.
How to produce it.
For whom to produce it.
How to produce it.
For whom to produce it.
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Production Possibility Table
answer
A table that lists a choice's opportunity cost by summarizing what alternative outputs you can achieve with your inputs.
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Production Possibility Curve
answer
A curve measuring the maximum combination of outputs that can be obtained from a given number of inputs.
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Marginal Opportunity
answer
In order to get more of something, one must give up ever-increasing quantities of something else.
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Comparative Advantage
answer
The ability to be better suited to the production of one good than to the production of one good than to the production of another good.
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Inefficiency
answer
Getting less output from inputs that, if devoted to some other activity, would produce more output.
question
Efficiency and Ineficiency
answer
Graph Points A(3), B(4), C(1), D (2)
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Neutral Technological Change
answer
Graph. Point A (1) moving to C (1) and B (4) moving to D (4)
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Biased Technological Change
answer
Graph. A (4) stays the same. B (1) shifts to C (1)
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Laissez-Faire
answer
Economic policy of leaving coordination of individuals' actions to the market. This allows countries consume beyond their PPC.
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Lowest Opportunity Cost
answer
The slope of the PPC is determined by the country with the ____.
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Outsourcing
answer
The relocation of production once done in one country to foreign countries.
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What is Globalization
answer
The increasing integration of economies, cultures, and institutions across the world.
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Law of One Price
answer
Wages of workers in one country will not differ significantly from the wages of (equal) workers in another institutionally similar country.
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