ECON 110 EXAM 1 ZIRLOTT QUESTIONS
WITH CORRECT ANSWERS 2026/2027
Study of Economics
the study of how society manages its resources
Microeconomics
the study of how households and firms make decisions and how they interact in
markets
Equity
When Prosperity is distributed uniformly among societies members
Scarcity
Limited nature of societies resources
Efficiency
Resources are used to their fullest potential to produce the most goods and
services
Trade-off
Giving up one thing for another
opportunity cost
the most desirable alternative given up as the result of a decision
Rationality
Rational people systematically and purposefully do the best they can to achieve
their objectives.
Incentives
, Rewards or punishments that encourage people to act in a certain way.
Positives: discounts, bonuses, prizes
Negatives: fines, taxes, penalties
Market
Buyers and sellers
Market Economy
Economic decisions are made by individuals or the open market.
invisible hand
A phrase coined by Adam Smith to describe the process that turns self-directed
gain into social and economic benefits for all
market faliure
a situation in which a market left on its own fails to allocate resources efficiently
circular flow diagram
a visual model of the economy that shows how dollars flow through markets
among households and firms
Actors in a Circular Flow Diagram
households, firms, government
two markets in the circular flow diagram
-the market for goods and services
-the market for "factors of production"
PPF (Production Possibilities Frontier)
a curve that shows the maximum quantity of one good that can be produced for
each possible quantity of another good produced
efficient, inefficient and unobtainable points on a PPF
WITH CORRECT ANSWERS 2026/2027
Study of Economics
the study of how society manages its resources
Microeconomics
the study of how households and firms make decisions and how they interact in
markets
Equity
When Prosperity is distributed uniformly among societies members
Scarcity
Limited nature of societies resources
Efficiency
Resources are used to their fullest potential to produce the most goods and
services
Trade-off
Giving up one thing for another
opportunity cost
the most desirable alternative given up as the result of a decision
Rationality
Rational people systematically and purposefully do the best they can to achieve
their objectives.
Incentives
, Rewards or punishments that encourage people to act in a certain way.
Positives: discounts, bonuses, prizes
Negatives: fines, taxes, penalties
Market
Buyers and sellers
Market Economy
Economic decisions are made by individuals or the open market.
invisible hand
A phrase coined by Adam Smith to describe the process that turns self-directed
gain into social and economic benefits for all
market faliure
a situation in which a market left on its own fails to allocate resources efficiently
circular flow diagram
a visual model of the economy that shows how dollars flow through markets
among households and firms
Actors in a Circular Flow Diagram
households, firms, government
two markets in the circular flow diagram
-the market for goods and services
-the market for "factors of production"
PPF (Production Possibilities Frontier)
a curve that shows the maximum quantity of one good that can be produced for
each possible quantity of another good produced
efficient, inefficient and unobtainable points on a PPF
