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Review_Test_1 - Ch 3 Supply and Demand • What do the...

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Test 1: Ch. 1 First Principles Perfectly competitive markets and efficiency Implication of scarcity Concept of opportunity cost What motivate people and firm’s behavior? Why do people exchange goods? What is an efficient allocation of goods? Ch. 2 Economic Models What are economic models? What does the Production Possibilities Frontier illustrate? o What does the shape of the PPF demonstrate? The negative slope? o Bowed out shape and Increasing opportunity costs o What do shifts of the PPF represent? What does the model of comparative advantage demonstrate? o Who specializes in what in the model of comparative advantage? o How to determine comparative advantage? What are the gains from specialization and trade? Experiment 1 Highlights Why did transactions price converge to a certain number? What happened to Total Gains as transaction prices converged?
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Unformatted text preview: Ch. 3 Supply and Demand • What do the demand and supply curves represent? o What does ceteris paribus mean? • What shifts the demand (or supply) curve? • What occurs if price is not equal to the equilibrium price? • What happens to equilibrium price and quantity when demand (or supply) shifts? • Application to Current Events Ch. 4 The Market Strikes Back • What is a price ceiling? Price floor? • What occurs in the market when a binding price ceiling (or floor) is put in place? • What are the negative consequences of a price ceiling or price floor. • Why would the government put these in place? • What are the effects of a quota? Why is it hard to remove? • What are the effects on price and quantity of a tax imposed on sellers? • What is the incidence of a tax?...
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