Microeconomics Midterm
Terms
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- List the Factors of Production
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Land, Labor, Capital, Entrepreneurship
(productive resources that produce goods and services) Land= rent, Labor=wages, Capital=interest, Entrepreneurship=profit - Define Opportunity Cost
- The value of the next best alternative that is given up in making a choice
- Define Marginal Benefit
- The benefit from consuming one more unit of a good and decreases as consumption of the good increases, also = the demand curve
- Define Marginal Cost
- The opportunity cost of pursuing an incremental increase in an activity aka the supply cuurve
- Positive vs. Normative Statements
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Positive are what is aka Facts- can be tested
Normative are what ought to be aka opinion- can't be tested - Define Ceteris Paribus
- Other things being equal
- Define Fallacy of Composition
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What is true for the parts is not always true for the whole
ex: person standing up at a football game - Define Post Hoc Fallacy
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Idea that the first event causes the second event to occur
ex: sending christmas cards causes christmas - Define Production Possibilities Frontier
- boundary between those combinations of goods and services that can be produced and those that cannot- shows efficiency btw mb and mc
- Define Allocative Efficiency
- we cannot produce more of any good without giving up some other good that we value more highly, producing at a point on the PPF MB=MC
- Define Economic Growth and the two key factors which influence it
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the expansion of production possibilities and increase in the standard of living
1. technological change
2. capital accumulation - Define Compartive Advantage
- a person can perform an activity at a lower opportunity cost than anyone else