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Exam 1 | ECON 112 - Principles of Microeconomics, Quizzes of Microeconomics

Class: ECON 112 - Principles of Microeconomics; Subject: Economics; University: Southern Illinois University Edwardsville; Term: Fall 2010;

Typology: Quizzes

2009/2010

Uploaded on 10/06/2010

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TERM 1
Comparative Advantage
DEFINITION 1
A specific advantage in one choice over someone else
because of a lower opportunity cost
TERM 2
Absolute Advantage
DEFINITION 2
A person has absolute advantage if that person is more
productive than the other person
TERM 3
Production Possibilities Curve
DEFINITION 3
A graph that describes the maximum amount of one good
that can be produced for every level of production of the
other good.
TERM 4
The Principle of Increasing Opportunity
Cost
DEFINITION 4
In expanding the production of any good, first employ those
resources with the lowest opportunity cost, and only
afterward turn to resources with higher opportunity costs.
TERM 5
Economics
DEFINITION 5
The study of how people make choices under conditions of
scarcity and of the results of those choices for society.
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Comparative Advantage

A specific advantage in one choice over someone else because of a lower opportunity cost TERM 2

Absolute Advantage

DEFINITION 2 A person has absolute advantage if that person is more productive than the other person TERM 3

Production Possibilities Curve

DEFINITION 3 A graph that describes the maximum amount of one good that can be produced for every level of production of the other good. TERM 4

The Principle of Increasing Opportunity

Cost

DEFINITION 4 In expanding the production of any good, first employ those resources with the lowest opportunity cost, and only afterward turn to resources with higher opportunity costs. TERM 5

Economics

DEFINITION 5 The study of how people make choices under conditions of scarcity and of the results of those choices for society.

The Scarcity

Principle

Boundless wants cannot be satisfied with limited resources. Therefore, having more of one thing usually means having less of another. Because of scarcity we must make choices. TERM 7

Rational Person

DEFINITION 7 Someone with well-defined goals who tries to fulfill those goals as best her or she can. TERM 8

The Cost-Benefit

Principle

DEFINITION 8 An individual (or firm or society) should take action if, and only if, the extra benefits from taking the action are at least as great as the extra costs. TERM 9

Economic Surplus

DEFINITION 9 The benefit of taking any action minus its cost. The goal of economic decision makers is to maximize their economic surplus. TERM 10

Microeconomics

DEFINITION 10 The study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets.

Reservation Price

Maximum you'd be willing to pay TERM 17

The Supply Curve

DEFINITION 17 A curve or schedule showing the quantity of a good that sellers wish to sell at each price TERM 18

Seller's Reservation Price

DEFINITION 18 The smallest dollar amount for which a seller would be willing to sell an additional unit, generally equal to marginal cost. TERM 19

Equilibrium

DEFINITION 19 The values of price and quantity for which quantity supplied and quantify demanded are equal. TERM 20

Complements

DEFINITION 20 Goods that go together

Substitutes

Goods that replace one another TERM 22

Normal Good

DEFINITION 22 One whose demand increases (decreases) when the incomes of buyers increase (decrease). TERM 23

Inferior Good

DEFINITION 23 One whose demand decreases (increases) when the income of buyers increase (decrease). TERM 24

The Equilibrium

Principle

DEFINITION 24 A market equilibrium leaves no unexploited opportunities for individuals, but may not exploit all gains achievable through collective action. TERM 25

Cash on the Table

DEFINITION 25 The "unexploited" potential gains from trade for one particular individual.

Cross-Price Elasticity of Demand

The percentage by which quantity demanded of the first good changes in response to a 1% change in the price of the second good. TERM 32

Income Elasticity of Demand

DEFINITION 32 The percentage by which quantity demanded changes in response to a 1% change in income. TERM 33

Price Elasticity of Supply

DEFINITION 33 The percentage change in the quantity supplied that occurs in response to a 1% change in price. TERM 34

Dead Weight Loss

DEFINITION 34 A measure of inefficiency. It is equal to the decrease in total surplus that results from an inefficient level of production.