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level: Level 1

Questions and Answers List

level questions: Level 1

QuestionAnswer
What are the three factors of production?Land, labor and capital
What is marginalism?It is the additional costs of production on top of already sunk costs.
What are sunk costs?Rent, electricity, wages etc. Already accounted for costs
What is an efficient market?One in which profit and is rare and the opportunity disappears fast
Whats the difference between micro and macro economicsMicro = people and their decisions, macro = larger scale such as businesses and government decisions
What is normative economics?Examining economic outcomes and making an evaluation on whether they're good or bad. ie is a higher minimum wage good?
What is positive economics?Attempts to understand the principles of economics and why things are happening. eg what happens when the minimum wage increases?
Define Ceteris ParibusAn economic situation in where all but two variables are held constant.
Define Post Hoc FallacyPHF is looking at two chronological events and incorrectly assuming one led to the other.
What is Fallacy of Composition?Incorrectly believing that because something is true in one case that it will be true in all cases.
What are some measures we can use to judge an economy?Efficiency, equity, economic growth and economic stability.
What are the three fundamental questions for any economy?What to produce, how to produce and who to produce for.
What are some characteristics of a Laissez-faire economy?Limited gov intervention, customer sovereignty, decentralised output distribution and free enterprise
What are some characteristics of a free market system?Price determined by seller, price mechanism, income distribution depends on purchases.
What is a mixed economy?Essentially an economy based on Laissez-faire principles but with tighter gov regulation.
What is a public good?One provided by the government. Freely accessible to everyone and has no competition.
What does lack of competition cause?A monopoly, where one or a small number of businesses will have large enough market share to control the entire market pricing and supply.
What are externalities?A member involved without being the consumer or producer. eg environmental impact due to factory production.
What are merit goods?Goods that everyone is entitled to regardless. Food, water and shelter.
What is a command economy?An economy where everything is owned/operated by the government and they have total control over economic decisions.
What is the difference in a firm and a household?A firm produces while a household consumes.
Demand is described as ...The amount of resources a household is willing and able to acquire.
What is a absolute advantage?When a competitor is able to make a similar product with less resources or in less time.
What is a comparative advantage?A business or nation will have a comparative adv. if they can produce a good for a lower opportunity cost than another business.