ECO 2013 UCF Exam 1 Spring 2026 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
What is economics? The study of how economic units make decisions under scarcity and the
incentives that influence those decisions.
What is scarcity? Limited quantities of resources to meet unlimited wants
What are resources? The things used in making goods and providing services
What is opportunity cost? The cost of the next best use of your time or money when you choose to do one
thing rather than another
Explicit Costs The actual payments a firm makes to its factors of production and other suppliers.
Implicit costs Indirect, non-purchased, or opportunity costs of resources provided by the
entrepreneur
Marginal Analysis Analysis that involves comparing marginal benefits and marginal costs
Marginal benefit The additional benefit to a consumer from consuming one more unit of a good or
service
Marginal Cost Extra cost of producing one additional unit of production.
What are incentives? Things that motivate or incite, which are used to change economic behavior
(Ex:coupons, profits)
What is a positive statement? "What is"(it actually happens)
, What is a normative statement? "What should be"
Comparative Advantage Ability of a country to produce a product at a lower opportunity cost than another
country
Absolute Advantage One can produce more of any good than someone else in a given time period
What is a Production Possibilities Frontier(PPF)? A line or curve that shows all the possible combinations of two outputs that can
be produced using all available sources
Which points on the PPF are feasible and efficient? The points on the frontier line are feasible "attainable" points.
Which points on the PPF are feasible but not efficient? The points inside the frontier
Which points on the PPF are not feasible? Anything past the frontier line
How can we use the Production possibilities frontier to A PPF shows all the possible combinations of two goods, or two options available
measure opportunity cost? at one point in time.
Why is the PPF sometimes a straight line and sometimes If it is bowed, it reflects an increasing opportunity cost (it is not constant)
bowed out?
Why do people, firms, and countries specialize? They will focus on economic activities best suited to their resources.
Efficiency To produce more of one good, you must give up some of another good
What are the three components of a competitive market? Free entry/exit, many buyers and sellers, homogenous goods
What is a market economy? A system based on private ownership, free trade and competition
What is a market? interaction between buyer and seller
What is a standardized good? A good or service for which any two units of it have the same features and are
interchangeable
What is a price taker? A firm that has no control over the price they can charge for their product
What is quantity demanded? Specific quantity that will be purchased at a specific or unique price
What is quantity supplied? The amount of a good that sellers are willing and able to sell to the market
Who demands goods/services? The demand for a good or service represents the willingness and ability of buyers
or consumers to purchase goods and services.
What is a demand curve? shows the relationship between price and quantity demanded.
What is the law of demand? When Price FALLS, quantity of Demand RISES
CORRECT ANSWERS
What is economics? The study of how economic units make decisions under scarcity and the
incentives that influence those decisions.
What is scarcity? Limited quantities of resources to meet unlimited wants
What are resources? The things used in making goods and providing services
What is opportunity cost? The cost of the next best use of your time or money when you choose to do one
thing rather than another
Explicit Costs The actual payments a firm makes to its factors of production and other suppliers.
Implicit costs Indirect, non-purchased, or opportunity costs of resources provided by the
entrepreneur
Marginal Analysis Analysis that involves comparing marginal benefits and marginal costs
Marginal benefit The additional benefit to a consumer from consuming one more unit of a good or
service
Marginal Cost Extra cost of producing one additional unit of production.
What are incentives? Things that motivate or incite, which are used to change economic behavior
(Ex:coupons, profits)
What is a positive statement? "What is"(it actually happens)
, What is a normative statement? "What should be"
Comparative Advantage Ability of a country to produce a product at a lower opportunity cost than another
country
Absolute Advantage One can produce more of any good than someone else in a given time period
What is a Production Possibilities Frontier(PPF)? A line or curve that shows all the possible combinations of two outputs that can
be produced using all available sources
Which points on the PPF are feasible and efficient? The points on the frontier line are feasible "attainable" points.
Which points on the PPF are feasible but not efficient? The points inside the frontier
Which points on the PPF are not feasible? Anything past the frontier line
How can we use the Production possibilities frontier to A PPF shows all the possible combinations of two goods, or two options available
measure opportunity cost? at one point in time.
Why is the PPF sometimes a straight line and sometimes If it is bowed, it reflects an increasing opportunity cost (it is not constant)
bowed out?
Why do people, firms, and countries specialize? They will focus on economic activities best suited to their resources.
Efficiency To produce more of one good, you must give up some of another good
What are the three components of a competitive market? Free entry/exit, many buyers and sellers, homogenous goods
What is a market economy? A system based on private ownership, free trade and competition
What is a market? interaction between buyer and seller
What is a standardized good? A good or service for which any two units of it have the same features and are
interchangeable
What is a price taker? A firm that has no control over the price they can charge for their product
What is quantity demanded? Specific quantity that will be purchased at a specific or unique price
What is quantity supplied? The amount of a good that sellers are willing and able to sell to the market
Who demands goods/services? The demand for a good or service represents the willingness and ability of buyers
or consumers to purchase goods and services.
What is a demand curve? shows the relationship between price and quantity demanded.
What is the law of demand? When Price FALLS, quantity of Demand RISES
