Microeconomics Course Overview

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Questions and Answers

What is the primary objective of an efficient economy?

To impose market regulations for stability

To provide unlimited choices to agents

To ensure fair distribution of wealth

To achieve maximum wealth under scarce resources (correct)

What does the concept of social optimum (Pareto efficiency) imply?

One's wellbeing cannot be improved without deteriorating someone else's (correct)

Everyone's wellbeing can be improved simultaneously

Wealth distribution does not affect social wellbeing

Some wellbeing can be improved without harming others

What is the opportunity cost in the context of pursuing further education instead of starting a professional career?

The satisfaction gained from acquiring a degree

The cost of tuition fees alone

The total cost of living expenses while studying

The potential income from working during the time spent studying (correct)

Which of the following best describes marginal utility?

The satisfaction gained from consuming an additional unit of a good Signup and view all the answers

What aspect distinguishes positive economics from normative economics?

Normative economics proposes ideal development pathways Signup and view all the answers

Which of the following statements about rational economic behavior is incorrect?

Agents prioritize social welfare over personal gain Signup and view all the answers

In economics, what do most choices being made 'at the margin' imply?

Decisions are about making slight adjustments to an existing situation Signup and view all the answers

What does the 'invisible hand' concept, proposed by Adam Smith, suggest about free trade?

It directs individuals to benefit society as a whole through self-interest Signup and view all the answers

Which statement is an example of a budget constraint?

Balancing spending between education and living expenses Signup and view all the answers

What represents a form of resource scarcity in economic terms?

The desire for more goods than can be produced with limited resources Signup and view all the answers

Which of the following best describes the role of opportunity cost in economic decision-making?

It refers to the benefit lost when one alternative is chosen over another Signup and view all the answers

How do budget constraints affect economic choices of individuals?

They restrict choices to those within the set budget limits Signup and view all the answers

Which of the following is NOT considered an explicit cost?

Forgone income from starting a career Signup and view all the answers

What is the end goal of rational economic agents in their decision-making?

To minimize costs and maximize satisfaction Signup and view all the answers

When evaluating the production possibilities curve, what does an increase in production of one good typically entail?

A decrease in the production of another good Signup and view all the answers

What is a critical factor in determining the marginal cost of production?

Changes in the amount of input employed for additional units Signup and view all the answers

What defines the consumer's budget constraint in economics?

The total income available for spending. Signup and view all the answers

Which of the following is NOT considered a factor of production?

Market demand Signup and view all the answers

How does scarcity affect economic choices?

It compels agents to optimize the use of limited resources. Signup and view all the answers

What is the primary objective of firms in economics?

Maximizing profit. Signup and view all the answers

Which scenario illustrates the concept of opportunity cost?

All of the above. Signup and view all the answers

Which of the following would least likely indicate a scarcity of resources?

Plentiful availability of a good. Signup and view all the answers

In what way might the budget constraint impact consumer choices?

It limits the goods that can be purchased. Signup and view all the answers

Which of the following is considered a capital good?

A factory building. Signup and view all the answers

Study Notes

Course of Microeconomics

The course is taught by Dr. Richard BOUGEROL and Dr. Viktoriya ONEGINA.
Contact information is provided.

Learning Objectives

Understand market functioning (demand, supply)
Analyze different market structures (monopoly, oligopoly, etc.)
Understand market failures and government intervention
Understand how to apply economic principles to policy questions

Content of the Course

Lecture 1: Microeconomics and its general principles
Lecture 2: Demand, supply, and elasticity
Lecture 3: Market structures
Lecture 4: Strategies in imperfect markets
Lecture 5: Market failures and state intervention
Lecture 6: Challenges of competition regulation, presentation of study cases
Revision and final exam

Course Assessment

Continuous assessments (40%):
- Oral presentation (40%): Maximum 4 students per team; choose a firm, use Framapad to submit analysis with team contributions, use concepts from class, do this for each session.
- Routine class participation (10%): Read, ask questions, and participate in discussions. Preparation in advance and class/after-class exercises are essential. Write case overview on Framapad.
Final written exam (50%): 1.5-hour exam

What is Economics?

Economics is the science that studies scarcity and choice.
It concerns how individuals, institutions, and society manage and use scarce resources to meet needs.
Economic wants are often unlimited while resources are limited.
Economics describes and analyzes production, exchange, distribution, and consumption of goods and economic resources.

Economics and Economy

The economy is the system of economic activities within a particular area (country).
It deals with the relationships between production, trade, and the supply of money in a particular area.
The economy of a society determines what goods are produced, how they are produced, who gets those goods, and how the economy adapts to change and promotes technological advancements.

What is an Economy?

Economic systems (economies) organize how agents relate and respond to the problem of resource allocation.
Systems differ in who owns factors of production and how activity is coordinated.
Planned economies: Production is centrally determined. Supply may not match demand.
Market economies: Production is determined by the market, with businesses having substantial freedom, and less control from public authorities.
Mixed economies: Combine features of free markets and government intervention.

Micro and Macroeconomics

Microeconomics: Studies the behavior of individual economic actors (individuals, firms) as if using a microscope.
- Focuses on decision-making of economic agents, particularly regarding prices of goods, complementary, and substitute goods.
Macroeconomics: Studies the economy as a whole, using indicators to track aggregate economic activity.
- Focuses on national economic activities; macroeconomic policies impact the growth of entire economies.

Principles of Microeconomics

Efficiency: Optimal allocation of scarce resources to maximize wealth.
Social optimum (Pareto): State where improving one's well-being requires worsening another's.
Equity: Fair distribution of resources.
Freedom: Wide range of choices for economic agents.

Positive and Normative Economics

Positive economics: Describes what is (e.g., how markets operate). Objective, avoids value judgments.
Normative economics: Prescribes what ought to be (e.g., ideal market functioning). Involves value judgments.

Homoeconomicus (Rationality)

Assumes economic agents are rational actors, seeking to maximize satisfaction and minimize costs, using perfect information (agents know all choices and consequences of choices).
Self-interest is a key element, yet free trade can benefit society overall.

Economic Choices and Incentives

Choices are impacted by incentives (costs and benefits).
Prices are critical for market economies as they signal scarcity, guide agents' actions, and help equilibrium between demand and supply.
Governments might use tools like taxes, regulations, or subsidies to alter market incentives and outcomes.

Graphs in Economics

Graphs visually display relationships between economic variables (independent, dependent).
Direct relationships (positive correlation) are shown as upsloping lines, inverse (negative correlation) are downsloping.

Factors of Production

Land: Natural resources used in production (e.g., arable land, minerals).
Labor: Physical and mental talents of workers used in production.
Capital: Manufactured aids used in production (e.g., factories, machinery).
Entrepreneurial ability: The capacity to organize and manage other factors of production.
Information and science: These factors also play a role in production.

Opportunity Cost

Opportunity cost is the cost of giving up the best alternative.
The choice of the best use of scarce resources considers alternative choices and opportunity costs.

Marginal Variables

Choices are often made at the margin (e.g., one more unit).
Marginal utility and costs are significant. Decision-makers consider the incremental value versus the incremental cost.

Marginal Utility and Costs

Marginal utility is the extra satisfaction from an additional unit consumed.
Marginal cost is the extra cost of producing an additional unit.
Optimal conditions are reached when marginal cost equals marginal utility.

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Description

This quiz provides an overview of the Microeconomics course taught by Dr. Richard Bougerol and Dr. Viktoriya Onegina. It covers market functioning, market structures, market failures, and government interventions, alongside the assessment methods for the course.