ECON 2301 Final EXAM QUESTIONS AND ANSWERS
Define economics. - CORRECT ANSWER✅✅The social science that concerns itself with how institutions,
individuals, and society make optimal choices under conditions of scarcity.
Why do economist s say there's no such thing as a free lunch? - CORRECT ANSWER✅✅Someone pays
the price. Scarcity requires a choice: opportunity cost. You give up whatever that resource is not used
for.
What is the economizing problem? - CORRECT ANSWER✅✅Resources are scarce.
Individuals have limited incomes and unlimited wants.
Society doesn't have enough of the four resources: land, labor, capital, entrepreneurial ability.
What are the four factors of production? - CORRECT ANSWER✅✅Labor
Land
Capital
Entrepreneurial ability
Why do firms use the least-cost production techniques? - CORRECT ANSWER✅✅To make more profit
and be more competitive.
What does the Invisible Hand refer to? - CORRECT ANSWER✅✅It produces exactly what we want at the
lowest possible price.
Virtues of the market system:
Efficiency (lowest cost)
Incentives
Freedom of choice (what to buy, where to work, etc.)
How does the simple circular flow model work? - CORRECT ANSWER✅✅Businesses buy resources from
households at the resource market.
Businesses sell products to households at the product market.
, Households buy products from businesses at the product market.
Households sell resources to businesses at the resource market.
What does the law of demand state? - CORRECT ANSWER✅✅Other things equal, as price falls, the
quantity demanded rises, and as price rises, the quantity demanded falls.
What are the determinants / shifters of the demand curve? - CORRECT ANSWER✅✅Consumer tastes
Number of buyers
Consumer incomes
Prices of related goods
Consumer expectations
What are the determinants / shifters of the supply curve? - CORRECT ANSWER✅✅Resource prices
Producer expectations
Number of sellers
Technology
Prices of other goods
Taxes and subsidies
What is happening when a market is in equilibrium? - CORRECT ANSWER✅✅The supply curve
intersects the demand curve, and the right amount of products are being produced and sold. Everyone
is happy.
What is a nation's true gain from trade? - CORRECT ANSWER✅✅Nations, as well as individuals, can gain
by specializing. With trade, everyone ends up better off than before.
Who is the world's leading trade nation? - CORRECT ANSWER✅✅United States
In recent years, has the U.S. imported more or exported more? - CORRECT ANSWER✅✅Imported
Define economics. - CORRECT ANSWER✅✅The social science that concerns itself with how institutions,
individuals, and society make optimal choices under conditions of scarcity.
Why do economist s say there's no such thing as a free lunch? - CORRECT ANSWER✅✅Someone pays
the price. Scarcity requires a choice: opportunity cost. You give up whatever that resource is not used
for.
What is the economizing problem? - CORRECT ANSWER✅✅Resources are scarce.
Individuals have limited incomes and unlimited wants.
Society doesn't have enough of the four resources: land, labor, capital, entrepreneurial ability.
What are the four factors of production? - CORRECT ANSWER✅✅Labor
Land
Capital
Entrepreneurial ability
Why do firms use the least-cost production techniques? - CORRECT ANSWER✅✅To make more profit
and be more competitive.
What does the Invisible Hand refer to? - CORRECT ANSWER✅✅It produces exactly what we want at the
lowest possible price.
Virtues of the market system:
Efficiency (lowest cost)
Incentives
Freedom of choice (what to buy, where to work, etc.)
How does the simple circular flow model work? - CORRECT ANSWER✅✅Businesses buy resources from
households at the resource market.
Businesses sell products to households at the product market.
, Households buy products from businesses at the product market.
Households sell resources to businesses at the resource market.
What does the law of demand state? - CORRECT ANSWER✅✅Other things equal, as price falls, the
quantity demanded rises, and as price rises, the quantity demanded falls.
What are the determinants / shifters of the demand curve? - CORRECT ANSWER✅✅Consumer tastes
Number of buyers
Consumer incomes
Prices of related goods
Consumer expectations
What are the determinants / shifters of the supply curve? - CORRECT ANSWER✅✅Resource prices
Producer expectations
Number of sellers
Technology
Prices of other goods
Taxes and subsidies
What is happening when a market is in equilibrium? - CORRECT ANSWER✅✅The supply curve
intersects the demand curve, and the right amount of products are being produced and sold. Everyone
is happy.
What is a nation's true gain from trade? - CORRECT ANSWER✅✅Nations, as well as individuals, can gain
by specializing. With trade, everyone ends up better off than before.
Who is the world's leading trade nation? - CORRECT ANSWER✅✅United States
In recent years, has the U.S. imported more or exported more? - CORRECT ANSWER✅✅Imported
