rojas unit 1 active recall

1. Q: Who is Adam Smith in your lecture notes, and what book/year and major ideas are tied to him?

A: Adam Smith = “Pappy of Economics.” He wrote The Wealth of Nations in 1776. In your lecture notes, Rojas ties him to three main ideas/principles: the invisible hand, free trade, and comparative advantage; the notes also describe him as bringing economics together as a field.

1B. Q: What does the “invisible hand” mean in Rojas’s lecture notes?

A: The economy will regulate itself; the lecture adds that the invisible hand motivates and promotes economic transactions.

1C. Q: What did the lecture say about The Wealth of Nations today?

A: The notes describe it as about 250 years old and, in the notebook’s wording, still used as “proof of financial markets.”

1D. Q: Why did Rojas connect comparative advantage with avoiding wasted resources?

A: The lecture notes say countries practicing absolute advantage can waste resources, so Smith developed/introduced comparative advantage to address that problem.

1E. Q: What did Rojas say about economics as a science before/around Adam Smith?

A: The lecture notes say most people did not recognize economics as a science until Adam Smith, who “brought it all together.”

2. Q: What is scarcity?

A: Scarcity = limited resources relative to wants; it forces people and societies to make choices.

2A. Q: According to Rojas’s lecture, what is economics “all about”?

A: Choices. Scarcity forces people/societies to make choices.

3. Q: What is a trade-off?

A: A trade-off is giving up one option in order to get another.

4. Q: What is opportunity cost?

A: Opportunity cost = the next-best alternative given up when a choice is made.

5. Q: What is the difference between positive and normative economics?

A: Positive = factual/descriptive claims about how the world works that can be evaluated with evidence. Normative = value judgments about how the world should be.

7. Q: What is the difference between microeconomics and macroeconomics?

A: Microeconomics studies households, firms, and specific markets. Macroeconomics studies the economy as a whole.

9. Q: What three basic economic questions must every society answer?

A: What to produce? How to produce? For whom to produce?

10. Q: What does “how to produce” involve?

A: Allocating scarce resources; the choice affects efficiency.

11. Q: Why study economics?

A: To improve efficiency and deal with scarcity of resources.

12. Q: What concern about population and resources did the lecture connect to Thomas Malthus?

A: Population could grow so much that it outgrows available food/resources.

12A. Q: [Corrected note] Who coined the phrase “the dismal science”?

A: Thomas Carlyle. Your notebook attributes the phrase to Malthus, but that attribution is incorrect. “birth control” wording as written; it is historically misleading.

13. Q: What are the eight economic goals from lecture?

A: Economic growth; full employment; balance of trade; economic freedom; economic security; economic efficiency; price-level stability; equity of income.

14. Q: Which economic goals were said to conflict with each other?

A: Freedom vs. income/equity; employment vs. efficiency.

15. Q: What is marginal analysis?

A: Comparing marginal revenue with marginal cost.

16. Q: What is marginal revenue (MR)?

A: Additional revenue from selling one more unit.

17. Q: What is marginal cost (MC)?

A: Additional cost of producing one more unit.

18. Q: What is the MR/MC decision rule?

A: MR > MC adds to profit; MR < MC reduces profit; profit is maximized around MR = MC.

20. Q: What scientific-method sequence is written in the lecture notes?

A: Hypothesis → theory/experiment → draw a conclusion.

23. Q: According to the notes, what can repeated evidence for a relationship lead to?

A: It can become an economic principle or law.

24. Q: What are the four factors of production?

A: Land, labor, capital, entrepreneurship.

25. Q: What is land as a factor of production?

A: Natural resources.

26. Q: What is labor as a factor of production?

A: Human effort used in production.

27. Q: What is capital as a factor of production?

A: Productive resources such as buildings and machines.

27A. Q: What is physical capital?

A: Human-made productive resources such as buildings, machines, tools, and equipment.

31. Q: Why is money NOT capital as a factor of production?

A: You cannot directly make anything with money; money can be used to obtain productive resources.

32. Q: What does an entrepreneur do?

A: Brings the factors/resources together, takes high risk, and receives profit as the reward if successful.

32A. Q: Who are the two main decision makers in the basic circular-flow model?

A: Households and firms.

32B. Q: What happens in the goods-and-services market in the circular-flow model?

A: Households are buyers; firms are sellers.

32C. Q: What happens in the factor market in the circular-flow model?

A: Households sell/provide factors of production; firms buy/use those factors.

32D. Q: What do the inner and outer loops represent in your circular-flow notes?

A: Inner loop = inputs/outputs (real resources, goods, and services). Outer loop = dollars/money flow.

33. Q: What does a PPF/PPC show?

A: The combinations of output an economy can produce with its available resources/factors of production and technology.

34. Q: What does a point ON the PPF mean?

A: Efficient and attainable production.

35. Q: What does a point INSIDE the PPF mean?

A: Inefficient/underutilized but attainable production.

35A. Q: How did Rojas connect recession to the PPF?

A: A recession can put actual production inside the PPF because resources are underused. [Corrected wording: being inside the PPF does not automatically mean recession.]

36. Q: What does a point OUTSIDE the PPF mean?

A: Currently unattainable with existing resources and technology.

37. Q: What does moving along a PPF involve?

A: A trade-off: gaining more of one good means giving up some of the other.

38. Q: What does the slope of a PPF represent?

A: Opportunity cost.

39. Q: What does a bowed-out PPF show?

A: Increasing opportunity cost.

40. Q: Why is a bowed-out PPF associated with increasing opportunity cost?

A: Resources are not equally suited to producing both goods, so more must be given up as production shifts farther toward one good.

41. Q: What does a straight-line PPF show?

A: Constant opportunity cost.

42. Q: What does constant opportunity cost mean?

A: Each additional unit of one good costs the same amount of the other good.

43. Q: On a HORIZONTAL PPF, what is the opportunity cost of producing more of the good on the x-axis?

A: 0 units of the y-axis good; x can increase without giving up y along that horizontal segment.

44. Q: On a VERTICAL PPF, what is the opportunity cost of producing more of the good on the y-axis?

A: 0 units of the x-axis good; y can increase without giving up x along that vertical segment.

44A. Q: What did lecture say about perfectly horizontal or vertical PPF cases?

A: They can theoretically exist, but the notes say they are not common.

45. Q: What can shift a PPF outward/right?

A: gaining more resources (usually from conquering), or technological innovation/advances.

46. Q: Can a PPF shift left as well as right?

A: Yes. Your lecture notes say PPFs mostly shift right and rarely shift left.

47. Q: What is absolute advantage?

A: Being more productive, such as producing more with the same resources or taking less time to produce the same amount.

48. Q: What is comparative advantage?

A: The ability to produce a good at a lower opportunity cost.

49. Q: How do you identify who has comparative advantage in a good?

A: Compare opportunity costs; the producer with the lower opportunity cost has comparative advantage.

50. Q: Can one producer have comparative advantage in both goods?

A: No. Your notes say it is impossible to have comparative advantage in both goods.

51. Q: Who should produce each good according to comparative advantage?

A: The country/person with the lower opportunity cost of producing that good.

53. Q: Where should mutually beneficial terms of trade fall?

A: Between the two parties’ opportunity costs.

54. Q: What is an import?

A: A good produced abroad and sold domestically.

55. Q: What is an export?

A: A good produced domestically and sold abroad.

57. Q: What are the four economic systems?

A: Traditional, market/free-market, command, mixed.

58. Q: What primarily determines production in a traditional economy?

A: Customs, traditions, and family/community practices; lecture mentions homemade/barter and producing for the family first.

59. Q: What primarily determines production in a market/free-market economy?

A: Consumers and producers through markets.

60. Q: What primarily determines production in a command economy?

A: The government/central authority.

61. Q: What is a mixed economy?

A: An economy combining market activity with government involvement.

62. Q: What advantages and disadvantages did your notes list for a traditional economy?

A: Advantages: strong community ties; stable/predictable roles. Disadvantages: little innovation; low economic growth.

63. Q: What advantages and disadvantages did your notes list for a free-market economy?

A: Advantages: encourages innovation; lots of consumer choice. Disadvantages: income inequality; monopolies.

64. Q: What advantages and disadvantages did your notes list for a command economy?

A: Advantages: can reduce inequality; government can quickly redirect resources. Disadvantages: inefficient production; limited consumer choice.

65. Q: What advantages and disadvantages did your notes list for a mixed economy?

A: Advantages: combines market efficiency with government protections; provides public goods. Disadvantages: higher taxes; government intervention can create inefficiency.

66. Q: What economic system was North Korea used as an example of, and what problems did lecture mention?

A: Command economy; shortages and famines.

66A. Q: What economic system was China used as an example of?

A: Mixed economy.

67. Q: What is a market?

A: A group of buyers and sellers of a particular good or service; the notes say markets can be less formally organized.

68. Q: What is a competitive market?

A: A market with so many buyers and sellers that no individual buyer or seller has much effect on the market price.

69. Q: What are the defining characteristics of perfect competition in your notes?

A: Many buyers and sellers, identical/same goods, and no individual buyer or seller has meaningful control over market price.

70. Q: What is a monopoly?

A: A market with one seller that has power to set/influence price.

71. Q: What is an oligopoly?

A: A market dominated by a few large firms, so one firm’s decisions can affect the others.

72. Q: What is monopolistic competition?

A: A market with many firms selling similar but differentiated products; each firm has some control over its price.

73. Q: What is game theory?

A: One business makes a choice based on another business’s action.

74. Q: What is demand?

A: The quantities consumers are willing AND able to buy at different prices during a given period.

75. Q: What is quantity demanded?

A: The amount of a good buyers are willing and able to purchase at a particular price.

76. Q: What is the Law of Demand?

A: Price rises → quantity demanded falls; price falls → quantity demanded rises, ceteris paribus.

77. Q: What does ceteris paribus mean?

A: Other conditions remaining the same.

78. Q: What is an expansion of demand in the lecture terminology?

A: Movement down the same demand curve as price falls and quantity demanded rises.

79. Q: What is a contraction of demand?

A: Movement up the same demand curve as price rises and quantity demanded falls.

80. Q: What is a demand schedule?

A: A table showing the relationship between price and quantity demanded.

81. Q: How is a demand curve drawn?

A: Price on the vertical axis, quantity on the horizontal axis, and the curve slopes downward.

81A. Q: Why does the demand curve slope downward according to the lecture?

A: Because of the Law of Demand: consumers are willing to buy more at lower prices and less at higher prices. The lecture also phrases this as consumers wanting to pay less for greater quantities of goods.

82. Q: What is market demand?

A: The sum of all individual consumers’ demands; individual quantities are added horizontally.

83. Q: What is the difference between a change in quantity demanded and a change in demand?

A: A change in the good’s own price causes movement along the same demand curve/change in quantity demanded. A non-price determinant shifts the entire demand curve/change in demand.

84. Q: What does a rightward vs. leftward demand shift mean?

A: Right = increase in demand; left = decrease in demand.

84A. Q: If demand increases while supply stays the same, what happens to equilibrium price and quantity?

A: Equilibrium price rises and equilibrium quantity rises.

84B. Q: If demand decreases while supply stays the same, what happens to equilibrium price and quantity?

A: Equilibrium price falls and equilibrium quantity falls.

85. Q: What are the major determinants of demand in your notes?

A: Consumer income; tastes/preferences; substitutes, complements; expectations; number of buyers/demographics.

89. Q: What is a normal good?

A: A good whose demand rises when income rises and falls when income falls.

90. Q: What is an inferior good?

A: A good whose demand falls when income rises and rises when income falls.

91. Q: What are substitute goods, and how does the price of one affect demand for the other?

A: Substitutes can replace one another. Price of one rises → demand for the other rises; price of one falls → demand for the other falls.

92. Q: What are complementary goods, and how does the price of one affect demand for the other?

A: Complements are used together. Price of one rises → demand for the other falls; price of one falls → demand for the other rises.

94. Q: What is supply?

A: The whole relationship between price and the quantities sellers are willing and able to sell.

95. Q: What is quantity supplied?

A: The amount sellers are willing and able to sell at a particular price.

96. Q: What is the Law of Supply?

A: Price rises → quantity supplied rises; price falls → quantity supplied falls, ceteris paribus.

97. Q: What is a supply schedule?

A: A table showing the relationship between price and quantity supplied.