ECN 221 Schumann Final Exam
Questions and Answers6
accounting costs - ANSWERS -traditional buisness expenses
economic costs - ANSWERS -accounting costs+oppurtunity costs
accounting profit - ANSWERS -revenue-accounting costs
economic profit - ANSWERS -revenue-accounting costs
What is economics the study of? - ANSWERS -Choices
Why do we have to make choices? - ANSWERS -Resources are scarce
Micro vs Macro - ANSWERS -Micro- Analyzing choices by individuals, households, and
businesses. Macro-Analyzing choices by governments, trade, inflation, money supply, GDP, and
societies.
Opportunity Cost - ANSWERS -What you give up when you make a choice, or the value of the
next best but unchosen alternative. Opportunity cost's are REAL costs that should affect our
choices.
Positive analysis - ANSWERS -using all tools such as math, statistics, ect in an objective way to
understand cause and effect (search for the truth)
, Normative analysis - ANSWERS -subjective statements or questions about how it *should be*
contrasts positive
Marginal analysis - ANSWERS -comparing the additional benefits and additional costs from each
unit of something (to find best quantity use The principle of diminishing benefits)
Marginal Cost - ANSWERS -for a buyer it's the same as price per unit (pizza $2.00)
Marginal Benefits - ANSWERS -Made up #, is the additional value gained from that unit or what
the next unit is worth too you (first pizza $6, 2nd pizza $4)
Marginal Analysis Decision Rule - ANSWERS -Consume all units for which MB>MC
4 Decision Pitfalls - ANSWERS -1. Ignoring Opportunity Cost
2. Using average costs or benefits to make quantity decisions (should use marginal cost and
benefits)
3. Considering Sunk Costs
4. Using % saved to make purchase decisions (use $ amount)
Budget Line Model - ANSWERS -A representation of how a consumer can spend their limited
income to purchase different goods.
Show's all possible combinations of two goods that can be purchased given income and two
prices.
Slope of BLM - ANSWERS -The slope of the B.L shows opportunity cost of one good in terms of
the other
Rise/Run= Bagles/Coffee=1/2=50c/1$
-Opportunity cost of one good in terms of the other
Questions and Answers6
accounting costs - ANSWERS -traditional buisness expenses
economic costs - ANSWERS -accounting costs+oppurtunity costs
accounting profit - ANSWERS -revenue-accounting costs
economic profit - ANSWERS -revenue-accounting costs
What is economics the study of? - ANSWERS -Choices
Why do we have to make choices? - ANSWERS -Resources are scarce
Micro vs Macro - ANSWERS -Micro- Analyzing choices by individuals, households, and
businesses. Macro-Analyzing choices by governments, trade, inflation, money supply, GDP, and
societies.
Opportunity Cost - ANSWERS -What you give up when you make a choice, or the value of the
next best but unchosen alternative. Opportunity cost's are REAL costs that should affect our
choices.
Positive analysis - ANSWERS -using all tools such as math, statistics, ect in an objective way to
understand cause and effect (search for the truth)
, Normative analysis - ANSWERS -subjective statements or questions about how it *should be*
contrasts positive
Marginal analysis - ANSWERS -comparing the additional benefits and additional costs from each
unit of something (to find best quantity use The principle of diminishing benefits)
Marginal Cost - ANSWERS -for a buyer it's the same as price per unit (pizza $2.00)
Marginal Benefits - ANSWERS -Made up #, is the additional value gained from that unit or what
the next unit is worth too you (first pizza $6, 2nd pizza $4)
Marginal Analysis Decision Rule - ANSWERS -Consume all units for which MB>MC
4 Decision Pitfalls - ANSWERS -1. Ignoring Opportunity Cost
2. Using average costs or benefits to make quantity decisions (should use marginal cost and
benefits)
3. Considering Sunk Costs
4. Using % saved to make purchase decisions (use $ amount)
Budget Line Model - ANSWERS -A representation of how a consumer can spend their limited
income to purchase different goods.
Show's all possible combinations of two goods that can be purchased given income and two
prices.
Slope of BLM - ANSWERS -The slope of the B.L shows opportunity cost of one good in terms of
the other
Rise/Run= Bagles/Coffee=1/2=50c/1$
-Opportunity cost of one good in terms of the other
