PSU Econ 104 Final ACTUAL Questions
and CORRECT Answers
Economics - CORRECT ANSWER- ✔✔the study of how society manages its scarce
resources
Macroeconomics - CORRECT ANSWER- ✔✔the study of the economy as a whole,
including topics such as inflation, unemployment, and economic growth
Microeconomics - CORRECT ANSWER- ✔✔the study of how households and firms make
decisions and how they interact in markets
Marginal Analysis - CORRECT ANSWER- ✔✔analysis that involves comparing marginal
benefits and marginal costs
Marginal Benefit - CORRECT ANSWER- ✔✔the additional benefit to a consumer from
consuming one more unit of a good or service
Marginal Cost - CORRECT ANSWER- ✔✔Extra cost of producing one additional unit of
production.
Sunk Cost - CORRECT ANSWER- ✔✔A cost that has already been incurred and that cannot
be changed by any decision made now or in the future.
Optimal Choices - CORRECT ANSWER- ✔✔
Positive vs. Normative Analysis - CORRECT ANSWER- ✔✔
Economic Models vs. The Real World - CORRECT ANSWER- ✔✔
Ceteris Paribus - CORRECT ANSWER- ✔✔a Latin phrase that means "all other things held
constant"
,The Law of Supply - CORRECT ANSWER- ✔✔the claim that, other things equal, the
quantity supplied of a good rises when the price of the good rises
The Law of Demand - CORRECT ANSWER- ✔✔the claim that, other things being equal,
the quantity demanded of a good falls when the price of the good rises
Determinants of Supply - CORRECT ANSWER- ✔✔resource prices, technology, taxes and
subsidies, prices of other goods, producer expectations, and the number of sellers in the
market
Determinants of Demand - CORRECT ANSWER- ✔✔Anything other than price of the
current item that influences consumer buying decisions, including income, tastes and
preferences, price of related items (substitutes and complements), number of consumers in
the market, and expected future price.
Economic Equilibrium - CORRECT ANSWER- ✔✔a state where economic forces such as
supply and demand are balanced
Change in Supply - CORRECT ANSWER- ✔✔A change in the quantity supplied of a good
or service at every price; a shift of the supply curve to the left or right.
Change in Demand - CORRECT ANSWER- ✔✔consumers demand different amounts at
every price, causing the demand curve to shift to the left or the right
Change in Quantity Supplied - CORRECT ANSWER- ✔✔a movement along the supply
curve that occurs in response to a change in price
Change in Quantity Demanded - CORRECT ANSWER- ✔✔movement along the demand
curve showing that a different quantity is purchased in response to a change in price
Supply Function - CORRECT ANSWER- ✔✔A function that describes how much of a good
will be produced at alternative prices of that good, alternative input prices, and alternative
values of other variables affecting supply.
, Inverse Supply Function - CORRECT ANSWER- ✔✔The supply function when a price is
expressed as a function of quantity supplied.
P=f(Qs)
Demand Function - CORRECT ANSWER- ✔✔a representation of how quantity demanded
depends on prices, income, and preferences
Inverse Demand Function - CORRECT ANSWER- ✔✔A restatement of the demand function
in which price is stated as a function of quantity.
Surplus - CORRECT ANSWER- ✔✔A situation in which quantity supplied is greater than
quantity demanded
Shortage - CORRECT ANSWER- ✔✔A situation in which quantity demanded is greater than
quantity supplied
Normal vs. Inferior Goods - CORRECT ANSWER- ✔✔*Normal goods* are goods that the
individual wants; e.g. steak, nice car, computer, etc.
*Inferior goods* are goods that the individual uses because they have to, e.g. public transit.
As individual's *income rises*, the individual *uses fewer inferior goods* - not gonna use
public transit if you can afford a car.
Complements vs. Substitutes - CORRECT ANSWER- ✔✔
Consumer Surplus - CORRECT ANSWER- ✔✔the difference between the highest price a
consumer is willing to pay for a good or service and the actual price the consumer pays
Producer Surplus - CORRECT ANSWER- ✔✔the difference between the lowest price a firm
would be willing to accept for a good or service and the price it actually receives
and CORRECT Answers
Economics - CORRECT ANSWER- ✔✔the study of how society manages its scarce
resources
Macroeconomics - CORRECT ANSWER- ✔✔the study of the economy as a whole,
including topics such as inflation, unemployment, and economic growth
Microeconomics - CORRECT ANSWER- ✔✔the study of how households and firms make
decisions and how they interact in markets
Marginal Analysis - CORRECT ANSWER- ✔✔analysis that involves comparing marginal
benefits and marginal costs
Marginal Benefit - CORRECT ANSWER- ✔✔the additional benefit to a consumer from
consuming one more unit of a good or service
Marginal Cost - CORRECT ANSWER- ✔✔Extra cost of producing one additional unit of
production.
Sunk Cost - CORRECT ANSWER- ✔✔A cost that has already been incurred and that cannot
be changed by any decision made now or in the future.
Optimal Choices - CORRECT ANSWER- ✔✔
Positive vs. Normative Analysis - CORRECT ANSWER- ✔✔
Economic Models vs. The Real World - CORRECT ANSWER- ✔✔
Ceteris Paribus - CORRECT ANSWER- ✔✔a Latin phrase that means "all other things held
constant"
,The Law of Supply - CORRECT ANSWER- ✔✔the claim that, other things equal, the
quantity supplied of a good rises when the price of the good rises
The Law of Demand - CORRECT ANSWER- ✔✔the claim that, other things being equal,
the quantity demanded of a good falls when the price of the good rises
Determinants of Supply - CORRECT ANSWER- ✔✔resource prices, technology, taxes and
subsidies, prices of other goods, producer expectations, and the number of sellers in the
market
Determinants of Demand - CORRECT ANSWER- ✔✔Anything other than price of the
current item that influences consumer buying decisions, including income, tastes and
preferences, price of related items (substitutes and complements), number of consumers in
the market, and expected future price.
Economic Equilibrium - CORRECT ANSWER- ✔✔a state where economic forces such as
supply and demand are balanced
Change in Supply - CORRECT ANSWER- ✔✔A change in the quantity supplied of a good
or service at every price; a shift of the supply curve to the left or right.
Change in Demand - CORRECT ANSWER- ✔✔consumers demand different amounts at
every price, causing the demand curve to shift to the left or the right
Change in Quantity Supplied - CORRECT ANSWER- ✔✔a movement along the supply
curve that occurs in response to a change in price
Change in Quantity Demanded - CORRECT ANSWER- ✔✔movement along the demand
curve showing that a different quantity is purchased in response to a change in price
Supply Function - CORRECT ANSWER- ✔✔A function that describes how much of a good
will be produced at alternative prices of that good, alternative input prices, and alternative
values of other variables affecting supply.
, Inverse Supply Function - CORRECT ANSWER- ✔✔The supply function when a price is
expressed as a function of quantity supplied.
P=f(Qs)
Demand Function - CORRECT ANSWER- ✔✔a representation of how quantity demanded
depends on prices, income, and preferences
Inverse Demand Function - CORRECT ANSWER- ✔✔A restatement of the demand function
in which price is stated as a function of quantity.
Surplus - CORRECT ANSWER- ✔✔A situation in which quantity supplied is greater than
quantity demanded
Shortage - CORRECT ANSWER- ✔✔A situation in which quantity demanded is greater than
quantity supplied
Normal vs. Inferior Goods - CORRECT ANSWER- ✔✔*Normal goods* are goods that the
individual wants; e.g. steak, nice car, computer, etc.
*Inferior goods* are goods that the individual uses because they have to, e.g. public transit.
As individual's *income rises*, the individual *uses fewer inferior goods* - not gonna use
public transit if you can afford a car.
Complements vs. Substitutes - CORRECT ANSWER- ✔✔
Consumer Surplus - CORRECT ANSWER- ✔✔the difference between the highest price a
consumer is willing to pay for a good or service and the actual price the consumer pays
Producer Surplus - CORRECT ANSWER- ✔✔the difference between the lowest price a firm
would be willing to accept for a good or service and the price it actually receives
