ECN 212 EVALUATION 2026 EXAM QUESTIONS AND
ANSWERS GRADED A+
✔✔normative analysis - ✔✔when we let our opinion into our analysis - "what should or
ought to be." It becomes objective - belongs to the mind of the subject
✔✔positive analysis - ✔✔being able to describe what is around us - "what is. "(not
influenced by personal feelings) This is objective
✔✔theories - ✔✔judged first and foremost on their ability to predict future
consequences of economic action
they are attempts to discover the principles that drive the world (need confirmation but
no justification)
can help us understand the concept of
causation
✔✔models - ✔✔metaphors that compare the object of their attention to something else
that it resembles
necessarily simplify things and reduce the dimensions of the world
✔✔middlemen - ✔✔a person who buys and sells, or arranges trades
reduce transaction costs
ex- local grocer reduces costs from food manufacturer's
✔✔transactions costs - ✔✔the time, effort, and other resources needed to search out,
negotiate and consummate an exchange (trade)
reduce our ability to produce gains from potential trades
✔✔production possibilities frontier - ✔✔1. An increase in the economy's resource base
would expand our ability to produce goods and services.
2. Advancements in technology can expand the economy's production possibilities.
3. An improvement in the rules (laws, institutions, and policies) of the economy can
increase output.
4. By working harder and giving up current leisure, we could also increase our
production of goods and services. This requires us to give up something else we value :
leisure
✔✔capital - ✔✔One of the factors of production that are used to create goods or
services and are not themselves in the process.
✔✔entrepreneurship - ✔✔the process of starting a business
, ✔✔labor - ✔✔One of the factors of production; Study of economic behavior of
employers and employees in response to changing prices, profits, wages, and working
conditions
✔✔land - ✔✔One of the factors of production; land comprises all naturally occurring
resources whose supply is inherently fixed
✔✔comparative advantage - ✔✔the proposition that the joint output of trading partners
will be greatest when each good is produced by the low opportunity cost producer
✔✔absolute advantage - ✔✔the ability to produce the same good fewer inputs than
another producer
✔✔division of labor (specialization) - ✔✔increase output for three reasons:
1. Specialization permits individuals to take
advantage of their existing skills.
2. Specialized workers become more skilled
with time.
3. Division of labor allows for the adoption
of mass-production technology.
✔✔ceteris paribus - ✔✔the concept of holding all else equal
✔✔real price - ✔✔adjusted for price inflation, and/or tax and/or ancillary charges
✔✔marginal cost - ✔✔cost of producing one more unit of a good
✔✔marginal benefit - ✔✔the additional satisfaction that a person receives from
consuming an additional unit of good or service
✔✔law of demand - ✔✔-As the price of a good increases,
people will choose to buy less of it.
- As the price of a good decreases,
people will choose to buy more of it.
*price determines quantity demanded
change in quantity/change in price < 0
slopes downward on a graph
✔✔Normal Goods - ✔✔the goods for which an increase in income leads to a greater
consumption of the good in question
(most goods are this kind) (when you get more money you buy more of them)
ANSWERS GRADED A+
✔✔normative analysis - ✔✔when we let our opinion into our analysis - "what should or
ought to be." It becomes objective - belongs to the mind of the subject
✔✔positive analysis - ✔✔being able to describe what is around us - "what is. "(not
influenced by personal feelings) This is objective
✔✔theories - ✔✔judged first and foremost on their ability to predict future
consequences of economic action
they are attempts to discover the principles that drive the world (need confirmation but
no justification)
can help us understand the concept of
causation
✔✔models - ✔✔metaphors that compare the object of their attention to something else
that it resembles
necessarily simplify things and reduce the dimensions of the world
✔✔middlemen - ✔✔a person who buys and sells, or arranges trades
reduce transaction costs
ex- local grocer reduces costs from food manufacturer's
✔✔transactions costs - ✔✔the time, effort, and other resources needed to search out,
negotiate and consummate an exchange (trade)
reduce our ability to produce gains from potential trades
✔✔production possibilities frontier - ✔✔1. An increase in the economy's resource base
would expand our ability to produce goods and services.
2. Advancements in technology can expand the economy's production possibilities.
3. An improvement in the rules (laws, institutions, and policies) of the economy can
increase output.
4. By working harder and giving up current leisure, we could also increase our
production of goods and services. This requires us to give up something else we value :
leisure
✔✔capital - ✔✔One of the factors of production that are used to create goods or
services and are not themselves in the process.
✔✔entrepreneurship - ✔✔the process of starting a business
, ✔✔labor - ✔✔One of the factors of production; Study of economic behavior of
employers and employees in response to changing prices, profits, wages, and working
conditions
✔✔land - ✔✔One of the factors of production; land comprises all naturally occurring
resources whose supply is inherently fixed
✔✔comparative advantage - ✔✔the proposition that the joint output of trading partners
will be greatest when each good is produced by the low opportunity cost producer
✔✔absolute advantage - ✔✔the ability to produce the same good fewer inputs than
another producer
✔✔division of labor (specialization) - ✔✔increase output for three reasons:
1. Specialization permits individuals to take
advantage of their existing skills.
2. Specialized workers become more skilled
with time.
3. Division of labor allows for the adoption
of mass-production technology.
✔✔ceteris paribus - ✔✔the concept of holding all else equal
✔✔real price - ✔✔adjusted for price inflation, and/or tax and/or ancillary charges
✔✔marginal cost - ✔✔cost of producing one more unit of a good
✔✔marginal benefit - ✔✔the additional satisfaction that a person receives from
consuming an additional unit of good or service
✔✔law of demand - ✔✔-As the price of a good increases,
people will choose to buy less of it.
- As the price of a good decreases,
people will choose to buy more of it.
*price determines quantity demanded
change in quantity/change in price < 0
slopes downward on a graph
✔✔Normal Goods - ✔✔the goods for which an increase in income leads to a greater
consumption of the good in question
(most goods are this kind) (when you get more money you buy more of them)
