Econ Final Exam Essay

969 WordsApr 23, 20134 Pages
ECON 2020 – FINAL EXAM REVIEW Exam 1 Review Scarcity * A situation in which unlimited wants exceed the limited resources available to fulfill those wants. * Scarcity leads to CHOICE Choice * A situation caused by scarcity. * Leads to OPPORTUNITY COST Rational Choice (Marginal Cost & Benefit) * Rational consumers will use all available information as they act to achieve their goals * Marginal Benefit – The benefit that arises from an increase in an activity * Marginal Cost – The opportunity cost that arises from an increase in that activity Normative vs Positive * Normative – “what ought to be” (Subjective) * Positive – “What is” (Objective) Specialization & Gains From Trade *…show more content…
* Where MR = MC Accounting vs Economic Profit * Accounting Profit – What a firm makes when total revenue is greater than total cost * Economic Profit – Takes into account Opportunity Cost. It asks what a firm makes when TR > TC and all other opportunity costs Perfect Competition * Features of Perfect Competition * Many buyers and sellers * Identical product * No barriers to entry or exit * Established firms have no advantage over newer firms * Perfect information – all buyers and sellers are fully

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