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Economics Review Questions Overview

1. Trade is generally preferred to no trade because both parties can benefit from voluntary exchange. However, more trade is not always preferred because at a certain point the costs may outweigh the benefits. 2. Markets where prices are taken as given and buyers and sellers act as price takers lead to efficient outcomes. 3. The height of a supply curve represents the marginal cost of producing another unit - the cost of the last unit produced. The area under the supply curve represents the total cost of producing the quantity at that price.

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38 views2 pages

Economics Review Questions Overview

1. Trade is generally preferred to no trade because both parties can benefit from voluntary exchange. However, more trade is not always preferred because at a certain point the costs may outweigh the benefits. 2. Markets where prices are taken as given and buyers and sellers act as price takers lead to efficient outcomes. 3. The height of a supply curve represents the marginal cost of producing another unit - the cost of the last unit produced. The area under the supply curve represents the total cost of producing the quantity at that price.

Uploaded by

Rachel Davis
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

Chapter 4 Review Questions 1.

Why is some Trade always prefferes by everyone to no trade, and why is more trade not always preffered by all to less trade? 2. 2. Why are the marginal values of all consumers in a given market identical? Why does this lead to efficient markets? 3. Why are markets where buyers and sellers take the marker price as given the notm? What efficiencies doe this lead to? 4. Why is the height of a supply curve at a given opportunity properly considered the cost of providing that last increment of the good (o.e. its marginal cost) 5. Why is the area under the supply curve up to a given quantity properly considered the total cost of providing that quantity of good to the market? 6. What is the double coincidence of wants problem in barter transactions? Why is money so universally used in exchange? 7. Are gifts examples of noneconomic behavious? Why do people give gifts in kind rather than in cash? 8. 8. Why does a reduction in middlemen cost benefit both sellers and buyers? 9. What is political lofrolling and why does it occur? Does it leas to further gains from trade? Chapter 1 Review Questions: 1. What are the general mechanisms for determining and coordinating in a decentralized economy? a. In unplanned market economies activities where along the productions process, individuals decide voluntarily to engage in some specified effort in return for wages etc., the activities are based on mutual benefits coordinated by prices determined in the market. The prices are determined by the actions of the consumers (demand) and the producers (supply.) the price of good indicates the willingness of consumers to forgo other goods in order to obtain that particular good. Eventually the price also shows the producers cost of manufacturing some more of a good. 2. Why do we restrict science to positive rather than normative statements? a. It is important to separate ones own beliefs about what is describable from what we believe is true or false. Positive statemnts are statements that can be classified as true or false. Normative statements are what an observer feels ought to be. 3. What do we use the term refutable proposition as opposed to provable proposition? a. Refutable proposition: Predictions that could be wrong b. In economics preffered that they could be wrong but are consistent with facts

c. Use refutable over provable because it is Logically impossible to prove theories d. Say theory is confirmed over proven 4. What is the true cost of attending college for four years? a. Cost=forgone alternative resulting from some action or decision. b. Tuition/income person would have made/ 5. Why do economists not use explanations based on tastes or preferences? a. Human preferences vary enormously. 6. What are the laws of demand and supply? a. Laws of demand: i. (demand curve=higher prices assoc. with smaller quantities) ii. if (other things remaining the same) the price of a good is increased the consumers would purchase a lower amount. b. relationship between the price og a good and the willingness of indivisuals to offer the good for sal is called a supply curve. (positively slopped) Chapter 2

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