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Micro Exam 1
| Question | Answer |
|---|---|
| 6 principles that help explain human behavior | People Respond to incentives, No such thing as free lunch, all human actions are interconnected, law of unanticipated influences (butterfly effect), actions have unintended consequences, and no one is ever truly in complete control. |
| Three Core Concepts of Managers | Rationality(refers to process and not outcome of decisions), Marginal Analysis, Optimization |
| Hobbesian Jungle | Fred and Harry example showing every man is enemy to every man |
| Property rights | Permissible use of resources, goods and service;and help alleviate the strains of scarcity. |
| comparative advantage | each can produce one good at a relatively lower cost than the other person can |
| Communal Property Rights | Good if no scarcity, and people fully account for the effects of their own use of the resources has on others. |
| Rational Behavior | consistent behavior that maximizes an individual's satisfaction through comparisons of the costs and benefits of alternative courses of action. |
| Rational Behavior (3 assumptions) | 1)Individual has preference and can identify, within limits, what he/she wants.2)capable of ordering his/her wants consistently from most preferred to least preferred. 3) Will choose consistently from these ordered preferences |
| Constrained Choices (Fig 2.1) | Choices are limited by outside forces. Ex. golf and studying. Time and resources limit your slope. |
| When do you know you are dealing with Microeconomics? | When economists measure, explain, and predict the demand for specific products. |
| Difficulties with Providing Public Goods | Free Riders and estimating the demand for public good or service |
| Limitations of Communal Property Rights | pollution, theft, |
| Two reasons for viewing groups as "Social Organisms" Herbert Spencer called it the “Social Organism” | 1) group consists of a mass of interdependencies 2)shared satisfaction |
| Small groups | have a problem being organized and sticking to a plan |
| Substitution effect | as the price of a good decreases, the good becomes relatively cheaper and consumers will substitute that good for others. turns demand from a straight line to a curve (faster increases toward lower prices |
| income effect | As goods purchases become cheaper relative to other goods (all else being equal, the ceteris paribus rule), consumer purchasing power rises (“real” income increases) so even more consumers will purchase the good |
| Estimating Public Good | they are summed vertically - each unit can be consumed by both individual at the same time |
| Voting Paradox | How economies decide public good - (cyclic not transitive) |
| What are all participants in a competitive market? | Price takers (no price setters because market participant takes price as given) |
| Complete information (Market experiment) | Open Bidding to be heard and prices are posted for all to see |
| Our Market Experiment represents... | small changes in price bring about large changes in quantities sold. |
| Lessons learned from Market Experiment | Market efficiency can be measured |
| Lessons learned from Market Experiment | tendency of market to move towards equilibrium |
| Lessons learned from Market Experiment | gains can be measured from market exchange |
| Lessons learned from Market Experiment | conditions affect speed at which equilibrium is approached |
Created by:
chrish1101
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