Technology and Incentives

These flashcards cover essential concepts from the lecture notes on technology, decision making, economic incentives, and the implications of industrialization.

What is opportunity cost?

The value of the next best action not taken.

What defines economic cost?

Direct costs incurred by taking an action plus opportunity cost.

What is economic rent?

Net benefit from an option taken minus opportunity cost.

Why do firms choose certain technologies?

To minimize costs and maximize production efficiency.

What is specialization?

When each person does just one or a few of the large number of tasks necessary for some project or goal.

What does comparative advantage refer to?

The ability of an individual or entity to produce a good or service at a lower opportunity cost than another.

What happens to wages in relation to energy and capital goods during the Industrial Revolution?

Wages rose in the eighteenth century in Britain compared to earlier periods.

What is a key idea in economic models concerning equilibrium?

Equilibrium is a situation that is self-perpetuating, meaning there is no tendency for it to change unless an external force is introduced.

What is the meaning of endogenous variables in economic models?

Variables whose values are determined by relationships built into the model.

What are the pros of automation?

Lower production costs, reliability, scalability, and the creation of new professions.

What are some cons of automation?

Job loss, wage inequality, cybersecurity risks.

What is required for addressing climate change according to the basic science?

Understanding CO2 emissions and the absorption of CO2 by natural processes.

What does the term 'innovation rents' refer to?

A form of economic rent representing extra profits made by exploiting an invention.