ECO 2023 Final Exam
Economics Correct answerThe study of how we make choices under scarcity
Scarcity Correct answerThe concept that there is less of a good freely available in nature than we would
like. Leads to competitive behavior.
3 types of resources Correct answerHuman Resources
Physical Resources
Natural Resources
Opportunity Cost Correct answerThe highest valued alternative that is and must be sacrificed when
making a decision
Incentives matter Correct answerChoice is influenced in a predictable way by changing incentives
Positive Economics Correct answerThe scientific study or what is (testable)
Normative Economics Correct answerJudgements about what ought to be (not testable)
4 pitfalls to avoid in economic thinking Correct answer1. Violation of the Ceterus Paribus principle, all
other things constant
2. Belief that good intentions guarntee good outcome
3. Belief that association is causation
4. Fallacy of composition: belief what is true for one is true for all
Microeconomics Correct answerFocuses on how human behavior affects the conduct of affairs within
individually defined units
Coercion Correct answerSomeone will devote resources to make you worse off if you do not comply
Voluntary Correct answerfully agree
Voluntary trade Correct answerBoth parties are better off through...
Creation of Wealth Correct answerSome people become rich will make everybody richer
transaction costs Correct answertime and effort needed to search out and complete exchange
middleman Correct answersomeone who sells and buys goods or sources or arranges trades and
reduces transaction costs
, Consumer surplus? Correct answerWhen consumers would be willing to pay more than market price for
good A.
substitutes Correct answerTwo products that serve similar purposes for a consumer
Substitutes Correct answerdecrease in the price of bus travel will decrease the demand for air travel
Complement goods Correct answerTwo products that are usually consumed jointly. An increase in the
price of coffee will cause demand for cream to fall
Curve shifts right Correct answerWhen supply of chairs goes up, what happens to the supply curve?
Quantity supplied decreases Correct answerWhen the price of a product has fallen, what happens to
supply?
Supply of newly constructed homes decrease Correct answerAn increase in the price of lumber would
have what effect on the home construction market?
Price goes down, quantity goes down Correct answerDemand for a good goes down, what would be the
effect on the equilibrium price and quantity?
Invisible hand Correct answerDirected by competitive market prices
Willingness to pay Correct answerWhat does the demand curve show?
Consumer surplus Correct answerdifference between amount consumers would be willing to pay and
actually pay
Legal barriers limiting entry Correct answerU.S. Postal service has a monopoly to deliver first class mail
due to:
Economics of scale are large relative to market demand Correct answerWhat's a reason a monopoly
would emerge in a market?
Price discrimination Correct answer- Downward slope demand curve
- Can separate consumers into 2 distinguishable groups
- Can prevent buyer from easily reselling
More elastic Correct answerIf a movie theater is going to gain by charging students a dollar less than
regular customers, the demand for students must be...
Deadweight loss (tax burden) Correct answerLoss from the eliminations of mutual benefit exchanges
that results from the imposition of tax
Economics Correct answerThe study of how we make choices under scarcity
Scarcity Correct answerThe concept that there is less of a good freely available in nature than we would
like. Leads to competitive behavior.
3 types of resources Correct answerHuman Resources
Physical Resources
Natural Resources
Opportunity Cost Correct answerThe highest valued alternative that is and must be sacrificed when
making a decision
Incentives matter Correct answerChoice is influenced in a predictable way by changing incentives
Positive Economics Correct answerThe scientific study or what is (testable)
Normative Economics Correct answerJudgements about what ought to be (not testable)
4 pitfalls to avoid in economic thinking Correct answer1. Violation of the Ceterus Paribus principle, all
other things constant
2. Belief that good intentions guarntee good outcome
3. Belief that association is causation
4. Fallacy of composition: belief what is true for one is true for all
Microeconomics Correct answerFocuses on how human behavior affects the conduct of affairs within
individually defined units
Coercion Correct answerSomeone will devote resources to make you worse off if you do not comply
Voluntary Correct answerfully agree
Voluntary trade Correct answerBoth parties are better off through...
Creation of Wealth Correct answerSome people become rich will make everybody richer
transaction costs Correct answertime and effort needed to search out and complete exchange
middleman Correct answersomeone who sells and buys goods or sources or arranges trades and
reduces transaction costs
, Consumer surplus? Correct answerWhen consumers would be willing to pay more than market price for
good A.
substitutes Correct answerTwo products that serve similar purposes for a consumer
Substitutes Correct answerdecrease in the price of bus travel will decrease the demand for air travel
Complement goods Correct answerTwo products that are usually consumed jointly. An increase in the
price of coffee will cause demand for cream to fall
Curve shifts right Correct answerWhen supply of chairs goes up, what happens to the supply curve?
Quantity supplied decreases Correct answerWhen the price of a product has fallen, what happens to
supply?
Supply of newly constructed homes decrease Correct answerAn increase in the price of lumber would
have what effect on the home construction market?
Price goes down, quantity goes down Correct answerDemand for a good goes down, what would be the
effect on the equilibrium price and quantity?
Invisible hand Correct answerDirected by competitive market prices
Willingness to pay Correct answerWhat does the demand curve show?
Consumer surplus Correct answerdifference between amount consumers would be willing to pay and
actually pay
Legal barriers limiting entry Correct answerU.S. Postal service has a monopoly to deliver first class mail
due to:
Economics of scale are large relative to market demand Correct answerWhat's a reason a monopoly
would emerge in a market?
Price discrimination Correct answer- Downward slope demand curve
- Can separate consumers into 2 distinguishable groups
- Can prevent buyer from easily reselling
More elastic Correct answerIf a movie theater is going to gain by charging students a dollar less than
regular customers, the demand for students must be...
Deadweight loss (tax burden) Correct answerLoss from the eliminations of mutual benefit exchanges
that results from the imposition of tax
