ECON B-251 EXAM 1 QUESTIONS AND ANSWERS
economics - CORRECT ANSWER✅✅the study of satisfying unlimited wants by utilizing limited resources
scarcity - CORRECT ANSWER✅✅unlimited wants and limited resources
the economic problem - CORRECT ANSWER✅✅deals with the problem of scarcity
Microeconomics - CORRECT ANSWER✅✅studies decisions by individual firms and governments
Macroeconomics - CORRECT ANSWER✅✅studies decisions made or actions taken by the entire
economy
ex. inflation, unemployment, GDP
rationality assumption - CORRECT ANSWER✅✅assumes that people do not intentionally make
decisions that would leave them worse off.
bounded rationality - CORRECT ANSWER✅✅assumes peoples rationality is constrained because they do
not have full information
prospect theory - CORRECT ANSWER✅✅demonstrates how people react differently to potential loss
and potential gain.
maximizer - CORRECT ANSWER✅✅try to make optimal decisions based on the rationality assumption
satisficer - CORRECT ANSWER✅✅try to find a "good enough" solution based on bounded rationality
self-interest - CORRECT ANSWER✅✅pursuit of one's own goals. Maximize happiness.
social-interest - CORRECT ANSWER✅✅choices that are best for society as a whole
, tradeoff - CORRECT ANSWER✅✅when we choose one thing, we give up something else
non-strategic - CORRECT ANSWER✅✅decisions based on an individual's or firm's own costs and
benefits
strategic - CORRECT ANSWER✅✅decisions based on others' decisions as well as one's cost and benefits
opportunity cost - CORRECT ANSWER✅✅The highest-valued, next-best alternative that must be
sacrificed to obtain something or to satisfy a want
marginal analysis - CORRECT ANSWER✅✅evaluates the consequences of making incremental changes
in the use of their resources
positive economics - CORRECT ANSWER✅✅purely descriptive statements or scientific predictions- a
statement of what is.
normative economics - CORRECT ANSWER✅✅analysis involving value judgements-- what ought to be
models - CORRECT ANSWER✅✅Simplified representations of the real world used as the basis for
predictions or explanations
three scarcity questions - CORRECT ANSWER✅✅1. what to produce?
2. how to produce?
3. for whom?
Four factors of production - CORRECT ANSWER✅✅land, labor, capital, entrepreneurship
Two types of capital - CORRECT ANSWER✅✅human (knowledge) and physical (machines)
economics - CORRECT ANSWER✅✅the study of satisfying unlimited wants by utilizing limited resources
scarcity - CORRECT ANSWER✅✅unlimited wants and limited resources
the economic problem - CORRECT ANSWER✅✅deals with the problem of scarcity
Microeconomics - CORRECT ANSWER✅✅studies decisions by individual firms and governments
Macroeconomics - CORRECT ANSWER✅✅studies decisions made or actions taken by the entire
economy
ex. inflation, unemployment, GDP
rationality assumption - CORRECT ANSWER✅✅assumes that people do not intentionally make
decisions that would leave them worse off.
bounded rationality - CORRECT ANSWER✅✅assumes peoples rationality is constrained because they do
not have full information
prospect theory - CORRECT ANSWER✅✅demonstrates how people react differently to potential loss
and potential gain.
maximizer - CORRECT ANSWER✅✅try to make optimal decisions based on the rationality assumption
satisficer - CORRECT ANSWER✅✅try to find a "good enough" solution based on bounded rationality
self-interest - CORRECT ANSWER✅✅pursuit of one's own goals. Maximize happiness.
social-interest - CORRECT ANSWER✅✅choices that are best for society as a whole
, tradeoff - CORRECT ANSWER✅✅when we choose one thing, we give up something else
non-strategic - CORRECT ANSWER✅✅decisions based on an individual's or firm's own costs and
benefits
strategic - CORRECT ANSWER✅✅decisions based on others' decisions as well as one's cost and benefits
opportunity cost - CORRECT ANSWER✅✅The highest-valued, next-best alternative that must be
sacrificed to obtain something or to satisfy a want
marginal analysis - CORRECT ANSWER✅✅evaluates the consequences of making incremental changes
in the use of their resources
positive economics - CORRECT ANSWER✅✅purely descriptive statements or scientific predictions- a
statement of what is.
normative economics - CORRECT ANSWER✅✅analysis involving value judgements-- what ought to be
models - CORRECT ANSWER✅✅Simplified representations of the real world used as the basis for
predictions or explanations
three scarcity questions - CORRECT ANSWER✅✅1. what to produce?
2. how to produce?
3. for whom?
Four factors of production - CORRECT ANSWER✅✅land, labor, capital, entrepreneurship
Two types of capital - CORRECT ANSWER✅✅human (knowledge) and physical (machines)
