Econ 150 Exam 1 questions with
accurate answers
Economics - answersThe study of how societies manage their scarce resources.
Approach - answers-Amoral (Positive economics (what is) vs. Normative economics
(what should be))
-Model Based
Scarcity and Choice - answers-Unlimited wants
-Limited resources
-Societies need to make choices What to produce/ how to produce/ distribution of
production and income)
Resources (What are the 3 factors of Production?) - answers1) Land (paid for via rent)
2) Labor (paid for via wages, Human Capital)
3) Capital ( Paid for via interest, Technology)
When resources are allocated, the goal is to... - answersMaximize social well being, or
minimize the effects of scarcity.
Efficiency - answersAll resources being used, utilizing the best technology available.
Period.
Opportunity Cost - answersThe economic cost of anything is the value of everything you
gave up to get it.
Increasing Opportunity Cost - answersAs incremental units of a good or service are
produced, the value of what you must give up to get it increases. This gives the PPC its
shape.
Diminishing Marginal Returns - answersAs we utilize more resources to increase
production of a good or service, ultimately the increase we achieve, per unit increase in
input, will decline.
"Marginal" - answersRefers to the last event, economic decision, sale or purchase. Last
unit produced.
, Sunk Costs - answersCost that occurred prior to the even being considered. Sunk costs
are irrelevant to a rational deciison.
Decision Rule - answers1) Marginal Benefit is less than Marginal Cost: DON'T do it
2) If Marginal Cost is less than Marginal Benefit: DO it
Marginal Private Costs - answersCosts related to the last unit produced and/or
purchased affecting those within the market.
Marginal External Costs - answersCosts related to the last unit produced/or purchased,
affecting those outside the market.
Marginal Social Costs - answersMPC plus MEC
Marginal Private Benefits - answersBenefits related to the last unit produced/or
purchased, affecting those within the market.
Marginal External Benefits - answersBenefits related to the last unit produced/or
purchased, affecting those outside the market.
Marginal Social Benefits - answersMPB plus MEB
Marginal Benefit for a supplier equals... - answersPrice
Max Capacity to Produce - answersAll points of the line reflect maximum output when
all factors are used applying the best technology available.
This means that...
-All points on the line are efficient
-All points under the line are economically inefficient
-All points outside the line are unattainable
Growth - answersA significant vehicle for increasing material well being, reducing
poverty and reducing suffering.
Pre Requisites for Growth - answers-Private Ownership
-Market Exchanges
-Well Functioning Monetary System
-Law Abiding Society and Government
Land Resources - answers-Useable contents of the natural environment
-Configuration of current technology
Labor Resources - answers-Population/ numbers/ average age, culture
-Quality of labor force/ human capital, education, training and healthcare
accurate answers
Economics - answersThe study of how societies manage their scarce resources.
Approach - answers-Amoral (Positive economics (what is) vs. Normative economics
(what should be))
-Model Based
Scarcity and Choice - answers-Unlimited wants
-Limited resources
-Societies need to make choices What to produce/ how to produce/ distribution of
production and income)
Resources (What are the 3 factors of Production?) - answers1) Land (paid for via rent)
2) Labor (paid for via wages, Human Capital)
3) Capital ( Paid for via interest, Technology)
When resources are allocated, the goal is to... - answersMaximize social well being, or
minimize the effects of scarcity.
Efficiency - answersAll resources being used, utilizing the best technology available.
Period.
Opportunity Cost - answersThe economic cost of anything is the value of everything you
gave up to get it.
Increasing Opportunity Cost - answersAs incremental units of a good or service are
produced, the value of what you must give up to get it increases. This gives the PPC its
shape.
Diminishing Marginal Returns - answersAs we utilize more resources to increase
production of a good or service, ultimately the increase we achieve, per unit increase in
input, will decline.
"Marginal" - answersRefers to the last event, economic decision, sale or purchase. Last
unit produced.
, Sunk Costs - answersCost that occurred prior to the even being considered. Sunk costs
are irrelevant to a rational deciison.
Decision Rule - answers1) Marginal Benefit is less than Marginal Cost: DON'T do it
2) If Marginal Cost is less than Marginal Benefit: DO it
Marginal Private Costs - answersCosts related to the last unit produced and/or
purchased affecting those within the market.
Marginal External Costs - answersCosts related to the last unit produced/or purchased,
affecting those outside the market.
Marginal Social Costs - answersMPC plus MEC
Marginal Private Benefits - answersBenefits related to the last unit produced/or
purchased, affecting those within the market.
Marginal External Benefits - answersBenefits related to the last unit produced/or
purchased, affecting those outside the market.
Marginal Social Benefits - answersMPB plus MEB
Marginal Benefit for a supplier equals... - answersPrice
Max Capacity to Produce - answersAll points of the line reflect maximum output when
all factors are used applying the best technology available.
This means that...
-All points on the line are efficient
-All points under the line are economically inefficient
-All points outside the line are unattainable
Growth - answersA significant vehicle for increasing material well being, reducing
poverty and reducing suffering.
Pre Requisites for Growth - answers-Private Ownership
-Market Exchanges
-Well Functioning Monetary System
-Law Abiding Society and Government
Land Resources - answers-Useable contents of the natural environment
-Configuration of current technology
Labor Resources - answers-Population/ numbers/ average age, culture
-Quality of labor force/ human capital, education, training and healthcare
