Page 1 of 37
Econ 200 Final Exam ALL QUESTIONS AND
CORRECT ANSWERS LATEST UPDATE THIS
YEAR
Econ 200 Final Exam
When economists develop models designed to explain the choices people make, they
generally assume that
people are rational.
A market is a group of ________of a good or service and the institution or arrangement by
which they come together to trade.
Buyers and Sellers
Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
When we assume the managers at Microsoft have used all available information and have
weighed all known benefits and costs, we are assuming rationality.
Lawrence Summers served as secretary of the treasury in the Clinton administration and as
director of National Economic Council in the Obama administration. He has been quoted as
1
, Page 2 of 37
giving the following moral defense of the economic approach. It would be more moral to
reduce pollution,
taking the cost into account because money spent on pollution reduction is not available for
other worthy activities.
Evaluate the following argument: "Adam Smith's analysis is based on a fundamental flaw: He
assumes that people are motivated by self-interest. But this isn't true. I'm not selfish, and
most people I know aren't selfish."
This statement is based on the misconception that following your self-interest and being selfish
are the same thing.
What do economists mean when they use the Latin expression ceteris paribus?
All else equal.
From the list below, select the variable that will cause the demand curve to shift:
Consumer income
In general, the term "ceteris paribus" means
all else equal.
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, Page 3 of 37
Consider the demand for smaller homes illustrated in the figure. What demographic change
would likely result in the demand curve for smaller homes shifting to the left?
The demand curve for smaller homes would likely shift to the left if the
portion of the population that is elderly
decreases.
Which of the following best describes scarcity?
Unlimited wants exceed the limited resources available.
Scarcity is central to the study of economics because it implies that
every choice involves an opportunity cost.
Consider the following statement: "The problem with economics is that it assumes that
consumers and firms always make the correct decisions. But we know that everyone makes
mistakes." What is the most correct response to this statement?
Economics assumes that consumers and firms are rational, not that they always make the right
decisions.
Late in the semester, a friend tells you,
"I was going to drop my psychology course so I could concentrate on my other courses, but I
had already put so much time into the course I decided not to drop it."
Is your friend's reasoning correct or incorrect?
3
, Page 4 of 37
Incorrect
What do economists mean by market equilibrium?
A market outcome where quantity supplied is equal to quantity demanded.
A black market is...
a market in which buying and selling take place at prices that violate government price
regulations.
In March 2010, President Obama signed into law the Patient Protection and Affordable Care
Act (ACA). Which of the following is true of the legislation?
The ACA...
provides tax credits to low-income individuals and small businesses with 25 or fewer
employees.
Which of the following is one of the major reasons for rapid increases in health care spending
in the United States?
advances in medical technology and new prescription drugs that have higher costs
The marginal cost of production (MC) for a firm in a perfectly competitive market is
illustrated in the figure. The figure also shows consumer demand.
If the firm produces 4 units of output, is it achieving allocative efficiency?
When producing 4 units of output, the firm
4
Econ 200 Final Exam ALL QUESTIONS AND
CORRECT ANSWERS LATEST UPDATE THIS
YEAR
Econ 200 Final Exam
When economists develop models designed to explain the choices people make, they
generally assume that
people are rational.
A market is a group of ________of a good or service and the institution or arrangement by
which they come together to trade.
Buyers and Sellers
Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision rational?
When we assume the managers at Microsoft have used all available information and have
weighed all known benefits and costs, we are assuming rationality.
Lawrence Summers served as secretary of the treasury in the Clinton administration and as
director of National Economic Council in the Obama administration. He has been quoted as
1
, Page 2 of 37
giving the following moral defense of the economic approach. It would be more moral to
reduce pollution,
taking the cost into account because money spent on pollution reduction is not available for
other worthy activities.
Evaluate the following argument: "Adam Smith's analysis is based on a fundamental flaw: He
assumes that people are motivated by self-interest. But this isn't true. I'm not selfish, and
most people I know aren't selfish."
This statement is based on the misconception that following your self-interest and being selfish
are the same thing.
What do economists mean when they use the Latin expression ceteris paribus?
All else equal.
From the list below, select the variable that will cause the demand curve to shift:
Consumer income
In general, the term "ceteris paribus" means
all else equal.
2
, Page 3 of 37
Consider the demand for smaller homes illustrated in the figure. What demographic change
would likely result in the demand curve for smaller homes shifting to the left?
The demand curve for smaller homes would likely shift to the left if the
portion of the population that is elderly
decreases.
Which of the following best describes scarcity?
Unlimited wants exceed the limited resources available.
Scarcity is central to the study of economics because it implies that
every choice involves an opportunity cost.
Consider the following statement: "The problem with economics is that it assumes that
consumers and firms always make the correct decisions. But we know that everyone makes
mistakes." What is the most correct response to this statement?
Economics assumes that consumers and firms are rational, not that they always make the right
decisions.
Late in the semester, a friend tells you,
"I was going to drop my psychology course so I could concentrate on my other courses, but I
had already put so much time into the course I decided not to drop it."
Is your friend's reasoning correct or incorrect?
3
, Page 4 of 37
Incorrect
What do economists mean by market equilibrium?
A market outcome where quantity supplied is equal to quantity demanded.
A black market is...
a market in which buying and selling take place at prices that violate government price
regulations.
In March 2010, President Obama signed into law the Patient Protection and Affordable Care
Act (ACA). Which of the following is true of the legislation?
The ACA...
provides tax credits to low-income individuals and small businesses with 25 or fewer
employees.
Which of the following is one of the major reasons for rapid increases in health care spending
in the United States?
advances in medical technology and new prescription drugs that have higher costs
The marginal cost of production (MC) for a firm in a perfectly competitive market is
illustrated in the figure. The figure also shows consumer demand.
If the firm produces 4 units of output, is it achieving allocative efficiency?
When producing 4 units of output, the firm
4
