Exam 3 Notes

Exam 3 Notes - Common Sense Economics Exam 3 Notes 1 The...

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Common Sense Economics Exam 3 Notes 1. The human desire for goods & services is virtually unlimited while the resources required for their production are limited. 2. The law of comparative advantages indicates that if a group of individuals wants to maximize their joint output, then each good should be supplied by the low opportunity cost producer. 3. Profits and losses play an important role in helping consumers decide which products they value the most by looking at each firm’s profit. 4. You should follow Nike’s advice and “just do it” when the additional benefits are greater than the additional costs. 5. Voluntary exchange is an important source of economic prosperity because it moves goods from people who value them less to people who value them more. It makes it possible to produce a larger output as a result of lower per unit costs that often accompany large-scale production. It makes it possible to produce a larger output as a result of gains from division of labor and specialization. 6. Voluntary exchange makes it possible for the trading partners to gain more value from the existing supply of goods and it also makes larger output levels possible. 7. Freedom of trade is not a guaranteed freedom included in the U.S. Constitution. 8. Market suppliers will provide consumers a good or service as long as they are willing to cover the cost of producing it. 9. A special-interest issue is one that benefits a small interest group at the expense of taxpayers and consumers. 10. A special-interest issue generates substantial personal benefits for a small minority of voters, but small personal costs are imposed on the vast overwhelming number of voters.
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11. Gains from trade, discovery of new products and better ways of doing things, and capital formation are most important for the growth of income and improvement in the general living standards of people. 12. An expected result of majoritarian democracy is budget deficits, transfer payments from taxpayers to well organized interest groups, and voters that are uninformed on many issues. 13. When enterprises get more funds from government subsidies and less from consumers, they will have incentive to spend more time trying to influence politicians and less time trying to reduce costs and please customers. 14. First-class mail service from the U.S. Post Office is an example of a good that is produced by a government enterprise but consumers purchase it with there own money. 15.
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This note was uploaded on 04/18/2008 for the course EC 101 taught by Professor Ferrarini during the Spring '08 term at N. Michigan.

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Exam 3 Notes - Common Sense Economics Exam 3 Notes 1 The...

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