Econ 206 Final Exam || with Errorless Answers.
What is opportunity cost? correct answers The best alternative that we forgot, or give up, when
we make a choice or decision.
Define Marginalism correct answers The process of analyzing the additional or increment costs
or benefits arising from a choice or decision.
What is an efficient market? correct answers A market in which profit opportunities are
eliminated almost instantaneously.
What is the difference between microeconomics and macroeconomics? correct answers
Microeconomics looks at the individual unit such as the household, the firm, the industry. It sees
and examines the "trees". Macroeconomics looks at the whole. It sees and analyzes the "forest"...
Define positive economics correct answers An approach to economics that seeks to understand
behavior and the operation of systems without making judgements. It describes what exists and
how it works.
Define normative economics correct answers An approach to economics that analyzes outcomes
of economic behavior, evaluates them as good or bad, and may prescribe courses of action.
What is efficiency? correct answers An efficient economy is one that produces what people want
at the least possible cost.
What is economic growth? correct answers An increase in the total output of an economy.
Growth occurs when a society acquires new resources or when it learns to produce more using
existing resources.
What is stability? correct answers A condition in which national output is growing steadily, with
low inflation and full employment of resources.
,What are the three questions a society must answer? correct answers (1) What gets produced?,
(2) How is it produced?, (3) Who gets what is produced?
Define absolute advantage correct answers A producer has an absolute advantage over another in
the production of a good or service if they can produce that product using fewer resources.
Define comparative advantage correct answers A producer has comparative advantage over
another in the production of a good or service if they can produce that product at a lower
opportunity cost.
What is a PPF? correct answers Production possibility frontier. A graph that shows all the
combinations of goods and services that can be produced if all of society's resources are used
efficiently.
What is a lassie-faire economy? correct answers "Allow them to do" --> An economy in which
individual people and firms pursue their own self-interest without any central direction or
regulation.
What is consumer sovereignty? correct answers The idea that consumers ultimately dictate what
will be produced (or not produced) by choosing what to purchase (and what not to purchase).
What are output markets? correct answers The markets in which goods and services are
exchanged.
What are input markets? correct answers The markets in which the resources used to produce
goods and services are exchanged.
What is QD? correct answers Quantity demanded. The amount of a product that a household
would buy in a given period if it could buy all it wanted at the current market price.
, What is the law of demand? correct answers The negative relationship between price and
quantity demanded. Ceteris paribus, as price rises ---> quantity demanded decreases, when price
falls ---> quantity demanded increases.
What are normal goods? correct answers Goods for which demand goes up when income is
higher and demand goes down when income is lower.
What are inferior goods? correct answers Goods for which demand tends to fall when income
rises. Example: Top Ramen
What are substitutes? correct answers Goods that can serve as a replacement for one another,
when the price of one increases, demand for the other increases.
What are perfect substitutes? correct answers Identical products
What are compliments? correct answers Goods that go together. A decrease in the price of one
results in an increase in demand for the other.
What does the shift of a demand curve represent? correct answers The change that takes place in
a demand curve corresponding to a new relationship between quantity demanded of a good and
price of that good. The shift is brought about by a change in the original conditions.
What does movement along the demand curve represent? correct answers The change in quantity
demanded due to a change in price.
What is quantity supplied? correct answers The amount of a particular product that a firm would
be willing and able to offer for sale at a given particular time period.
What is the law of supply? correct answers The positive relationship between price and quantity
of goods supplied. An increase in market price will lead to an increase in quantity supplied. A
decrease in market price will lead to a decrease in quantity supplied.
What is opportunity cost? correct answers The best alternative that we forgot, or give up, when
we make a choice or decision.
Define Marginalism correct answers The process of analyzing the additional or increment costs
or benefits arising from a choice or decision.
What is an efficient market? correct answers A market in which profit opportunities are
eliminated almost instantaneously.
What is the difference between microeconomics and macroeconomics? correct answers
Microeconomics looks at the individual unit such as the household, the firm, the industry. It sees
and examines the "trees". Macroeconomics looks at the whole. It sees and analyzes the "forest"...
Define positive economics correct answers An approach to economics that seeks to understand
behavior and the operation of systems without making judgements. It describes what exists and
how it works.
Define normative economics correct answers An approach to economics that analyzes outcomes
of economic behavior, evaluates them as good or bad, and may prescribe courses of action.
What is efficiency? correct answers An efficient economy is one that produces what people want
at the least possible cost.
What is economic growth? correct answers An increase in the total output of an economy.
Growth occurs when a society acquires new resources or when it learns to produce more using
existing resources.
What is stability? correct answers A condition in which national output is growing steadily, with
low inflation and full employment of resources.
,What are the three questions a society must answer? correct answers (1) What gets produced?,
(2) How is it produced?, (3) Who gets what is produced?
Define absolute advantage correct answers A producer has an absolute advantage over another in
the production of a good or service if they can produce that product using fewer resources.
Define comparative advantage correct answers A producer has comparative advantage over
another in the production of a good or service if they can produce that product at a lower
opportunity cost.
What is a PPF? correct answers Production possibility frontier. A graph that shows all the
combinations of goods and services that can be produced if all of society's resources are used
efficiently.
What is a lassie-faire economy? correct answers "Allow them to do" --> An economy in which
individual people and firms pursue their own self-interest without any central direction or
regulation.
What is consumer sovereignty? correct answers The idea that consumers ultimately dictate what
will be produced (or not produced) by choosing what to purchase (and what not to purchase).
What are output markets? correct answers The markets in which goods and services are
exchanged.
What are input markets? correct answers The markets in which the resources used to produce
goods and services are exchanged.
What is QD? correct answers Quantity demanded. The amount of a product that a household
would buy in a given period if it could buy all it wanted at the current market price.
, What is the law of demand? correct answers The negative relationship between price and
quantity demanded. Ceteris paribus, as price rises ---> quantity demanded decreases, when price
falls ---> quantity demanded increases.
What are normal goods? correct answers Goods for which demand goes up when income is
higher and demand goes down when income is lower.
What are inferior goods? correct answers Goods for which demand tends to fall when income
rises. Example: Top Ramen
What are substitutes? correct answers Goods that can serve as a replacement for one another,
when the price of one increases, demand for the other increases.
What are perfect substitutes? correct answers Identical products
What are compliments? correct answers Goods that go together. A decrease in the price of one
results in an increase in demand for the other.
What does the shift of a demand curve represent? correct answers The change that takes place in
a demand curve corresponding to a new relationship between quantity demanded of a good and
price of that good. The shift is brought about by a change in the original conditions.
What does movement along the demand curve represent? correct answers The change in quantity
demanded due to a change in price.
What is quantity supplied? correct answers The amount of a particular product that a firm would
be willing and able to offer for sale at a given particular time period.
What is the law of supply? correct answers The positive relationship between price and quantity
of goods supplied. An increase in market price will lead to an increase in quantity supplied. A
decrease in market price will lead to a decrease in quantity supplied.
