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micro theory review sheet, exam 1

micro theory review sheet, exam 1 - Microeconomic Theory...

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Microeconomic Theory Review Questions: 1. Define: a. Economy: A set of institutions devised to produce and distribute goods b. Economics: study of the economy c. Scarcity: limited means available to satisfy unlimited wants d. Markets: process whereby buyers and sellers interact and determine prices and quantities e. Microeconomics: study of the behavior of small economic units such as consumers and firms f. Macroeconomics: the study of aggregate economic factors g. The invisible hand: people pursuing their own ends in competitive markets promote an important social goal, economic efficiency h. Theory: explanations, models/causal stories i. Normative economics: nonscientific value judgment, what should be j. Positive economics: assessment of expected, objective outcomes, what is k. Opportunity costs: the sum of explicit and implicit costs i. Explicit cost: associated w/ cash flows ii. Implicit cost: associated w/ the value of time 2. Classical Liberalism based on 3 beliefs: a.
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