PSU ECON 104 EXAM 1 BROWN SP22
QUESTIONS & ACCURATE CORRECT
ANSWERS
Scarcity - Correct Answer ✔✔ Limited quantities of resources to meet unlimited wants
Economics - Correct Answer ✔✔ The study of the choices people make to attain their
goals, given their scarce resources
opportunity cost - Correct Answer ✔✔ The highest-valued, next best alternative that
must be sacrificed to obtain something or satisfy a want or to engage in an activity.
Individual Behavior - Correct Answer ✔✔ make ourselves as best off as possible, given
scarcity
Assumptions of Individual Behavior - Correct Answer ✔✔ 1. people are rational
2. people respond to incentive
3. optimal decisions are made at the margin
Rationality - Correct Answer ✔✔ logic and reasoning
Incentives - Correct Answer ✔✔ rewards or punishments that motivate particular
choices
marginal thinking - Correct Answer ✔✔ requires decision-makers to evaluate whether
the benefit of one more unit of something is greater than its cost
Models - Correct Answer ✔✔ simple representations of the real world used as the basis
for predictions or explanations
Ceteris Paribus - Correct Answer ✔✔ a Latin phrase that means "all other things equal"
positive economics - Correct Answer ✔✔ Purely descriptive statements or scientific
predictions
normative economics - Correct Answer ✔✔ Analysis involving value judgments about
economic policies; relates to whether outcomes are good or bad. A statement of what
ought to be.
Microeconomics - Correct Answer ✔✔ the study of decision making undertaken by
individuals or households and firms
, Macroeconomics - Correct Answer ✔✔ The study of the behavior of the economy as a
whole
Production - Correct Answer ✔✔ Any activity that results in the conversion of resources
into products that can be used in consumption.
Inputs - Correct Answer ✔✔ land, labor, physical capital, human capital
Three Questions for an Economic System - Correct Answer ✔✔ 1. What goods and
services will be produced?
2. How will goods and services be produced?
3. Who will receive the goods and services produced?
market economy - Correct Answer ✔✔ Economic decisions are made by individuals or
the open market.
centrally planned economy - Correct Answer ✔✔ an economy in which the government
decides how economic resources will be allocated
mixed economy - Correct Answer ✔✔ An economy in which private enterprise exists in
combination with a considerable amount of government regulation and promotion.
Communism - Correct Answer ✔✔ A theory or system of social organization based on
the holding of all property in common, actual ownership being ascribed to the
community as a whole or to the state.
Socialism - Correct Answer ✔✔ A system in which society, usually in the form of the
government, owns and controls the means of production.
social democracy - Correct Answer ✔✔ The society and economy should be run
democratically, they should be dedicated to meeting the needs of the people as a whole
Capitalism/Free Market - Correct Answer ✔✔ an economic and political system in which
a country's trade and industry are controlled by private owners for profit, rather than by
the state.
incentives in free market - Correct Answer ✔✔ Profit motive and people work, invent,
research
The economic result of a free market - Correct Answer ✔✔ economic growth,
technological advancements, higher standards of living, low levels of government
corruption
private ownership - Correct Answer ✔✔ a situation in which individuals (rather than
workers, the government, or communal groups) own the raw materials, machines, tools,
QUESTIONS & ACCURATE CORRECT
ANSWERS
Scarcity - Correct Answer ✔✔ Limited quantities of resources to meet unlimited wants
Economics - Correct Answer ✔✔ The study of the choices people make to attain their
goals, given their scarce resources
opportunity cost - Correct Answer ✔✔ The highest-valued, next best alternative that
must be sacrificed to obtain something or satisfy a want or to engage in an activity.
Individual Behavior - Correct Answer ✔✔ make ourselves as best off as possible, given
scarcity
Assumptions of Individual Behavior - Correct Answer ✔✔ 1. people are rational
2. people respond to incentive
3. optimal decisions are made at the margin
Rationality - Correct Answer ✔✔ logic and reasoning
Incentives - Correct Answer ✔✔ rewards or punishments that motivate particular
choices
marginal thinking - Correct Answer ✔✔ requires decision-makers to evaluate whether
the benefit of one more unit of something is greater than its cost
Models - Correct Answer ✔✔ simple representations of the real world used as the basis
for predictions or explanations
Ceteris Paribus - Correct Answer ✔✔ a Latin phrase that means "all other things equal"
positive economics - Correct Answer ✔✔ Purely descriptive statements or scientific
predictions
normative economics - Correct Answer ✔✔ Analysis involving value judgments about
economic policies; relates to whether outcomes are good or bad. A statement of what
ought to be.
Microeconomics - Correct Answer ✔✔ the study of decision making undertaken by
individuals or households and firms
, Macroeconomics - Correct Answer ✔✔ The study of the behavior of the economy as a
whole
Production - Correct Answer ✔✔ Any activity that results in the conversion of resources
into products that can be used in consumption.
Inputs - Correct Answer ✔✔ land, labor, physical capital, human capital
Three Questions for an Economic System - Correct Answer ✔✔ 1. What goods and
services will be produced?
2. How will goods and services be produced?
3. Who will receive the goods and services produced?
market economy - Correct Answer ✔✔ Economic decisions are made by individuals or
the open market.
centrally planned economy - Correct Answer ✔✔ an economy in which the government
decides how economic resources will be allocated
mixed economy - Correct Answer ✔✔ An economy in which private enterprise exists in
combination with a considerable amount of government regulation and promotion.
Communism - Correct Answer ✔✔ A theory or system of social organization based on
the holding of all property in common, actual ownership being ascribed to the
community as a whole or to the state.
Socialism - Correct Answer ✔✔ A system in which society, usually in the form of the
government, owns and controls the means of production.
social democracy - Correct Answer ✔✔ The society and economy should be run
democratically, they should be dedicated to meeting the needs of the people as a whole
Capitalism/Free Market - Correct Answer ✔✔ an economic and political system in which
a country's trade and industry are controlled by private owners for profit, rather than by
the state.
incentives in free market - Correct Answer ✔✔ Profit motive and people work, invent,
research
The economic result of a free market - Correct Answer ✔✔ economic growth,
technological advancements, higher standards of living, low levels of government
corruption
private ownership - Correct Answer ✔✔ a situation in which individuals (rather than
workers, the government, or communal groups) own the raw materials, machines, tools,
