coursepacket2 - ECON 103, SPRING 2011 Course packet 2:...

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ECON 103, SPRING 2011 Çağdaş Ağırdaş Course packet 2: Basics of Economics 1. First, definition of economics. 2. What is the main reason why economics exists? 3. What is the difference between microeconomics and macroeconomics? 4. Who is the father of economics? What do you know about him? Explain the “invisible hand”.
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It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. 5. What is opportunity cost? 6. What does “marginal” mean? 7. How do people make decisions?
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8. Why do people trade goods and services? Adam Smith’s pin factory example: (page 12 of the book) One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top…etc 9. What is equilibrium? 10. Is free market system always efficient?
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11. One of the main debates in economics is whether we should have a big government or a small government. Summarize these two arguments. 12. What is a model and why do we use models in economics? 13. What is the Production Possibilities Frontier? (PPF or PPC) What simplification does this model have? What are the inputs going into PPF? 14. Let’s draw the Production Possibilities Frontier for a single firm and for a country.
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15. Why is PPF downward sloping? Demonstrate the opportunity cost on the PPF. 16. Identify three points, A, B, C on the PPF such that A is feasible but not efficient, B is feasible and efficient while C is not feasible. 17. Which points are realistic on PPF? 18. Demonstrate the economic growth and the vicious cycle of poverty on the PPF. 19. Which countries are more likely to grow?
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20. Can PPF shift inward? How would you show the effect of Hurricane Katrina on New Orleans’ PPF? 21. Who is François Quesnay? Draw the circular flow diagram of François Quesnay and explain the simplifications that it uses. What are the four factors of production (inputs)? What are the payments to these factors of production? 22. Define positive economics and normative economics.
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This note was uploaded on 02/23/2011 for the course ECON 103 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

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coursepacket2 - ECON 103, SPRING 2011 Course packet 2:...

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