ECO 2013 Exam 1 Vocabulary UCF Nora Underwood Fall 2017 UPDATED
ACTUAL QUESTIONS AND CORRECT ANSWERS
What is economics? The study of how society manages its scarce resources
, What is scarcity? Society has limited resources and therefore cannot produce all the goods and
services people wish to have
What are resources? What society uses to make goods and services.
What is opportunity cost? What you give up to get that item.
What are explicit costs? Monetary cost
What are implicit costs? Something you give up but do not explicitly pay for.
What is marginal change? A small incremental adjustment to an existing plan of action.
What is marginal analysis? Deciding if the marginal benefit is greater than the marginal cost.
What is marginal benefit? What the consumer gains from a small incremental adjustment to an existing plan
of action.
What is marginal cost? What it costs the consumer to make a small incremental adjustment to an existing
plan of action.
What is an incentive? Something that induces people to act.
What is efficiency? Society is getting the maximum benefits from its scarce resources.
What is equality? Maximum benefits from its scarce resources are distributed uniformly among
society's members.
What is the difference between efficiency and equality? Efficiency refers to the size of the economic pie, and equality refers to how the
pie is divided into individual slices.
How do we measure productivity? Comparing the amount of goods and services produced with the inputs which
were used in production.
What is a positive statement? They make a claim about how the world is.
What is a normative statement? They make a claim about how the world ought to be.
Explain how dollars and goods/services flow in the The two loops of the circular-flow diagram are distinct but related. The inner loop
circular flow diagram. represents the flows of inputs and outputs. The households sell the use of their
labor, land, and capital to the firms in the markets for the factors of production.
The firms then use these factors to produce goods and services, which in turn are
sold to households in the markets for goods and services. The outer loop of the
diagram represents the corresponding flow of dollars. The households spend
money to buy goods and services from the firms. The firms use some of the
revenue from these sales to pay for the factors of production, such as the wages
of their workers. What's left is the profit of the firm owners, who are themselves
members of households.
ACTUAL QUESTIONS AND CORRECT ANSWERS
What is economics? The study of how society manages its scarce resources
, What is scarcity? Society has limited resources and therefore cannot produce all the goods and
services people wish to have
What are resources? What society uses to make goods and services.
What is opportunity cost? What you give up to get that item.
What are explicit costs? Monetary cost
What are implicit costs? Something you give up but do not explicitly pay for.
What is marginal change? A small incremental adjustment to an existing plan of action.
What is marginal analysis? Deciding if the marginal benefit is greater than the marginal cost.
What is marginal benefit? What the consumer gains from a small incremental adjustment to an existing plan
of action.
What is marginal cost? What it costs the consumer to make a small incremental adjustment to an existing
plan of action.
What is an incentive? Something that induces people to act.
What is efficiency? Society is getting the maximum benefits from its scarce resources.
What is equality? Maximum benefits from its scarce resources are distributed uniformly among
society's members.
What is the difference between efficiency and equality? Efficiency refers to the size of the economic pie, and equality refers to how the
pie is divided into individual slices.
How do we measure productivity? Comparing the amount of goods and services produced with the inputs which
were used in production.
What is a positive statement? They make a claim about how the world is.
What is a normative statement? They make a claim about how the world ought to be.
Explain how dollars and goods/services flow in the The two loops of the circular-flow diagram are distinct but related. The inner loop
circular flow diagram. represents the flows of inputs and outputs. The households sell the use of their
labor, land, and capital to the firms in the markets for the factors of production.
The firms then use these factors to produce goods and services, which in turn are
sold to households in the markets for goods and services. The outer loop of the
diagram represents the corresponding flow of dollars. The households spend
money to buy goods and services from the firms. The firms use some of the
revenue from these sales to pay for the factors of production, such as the wages
of their workers. What's left is the profit of the firm owners, who are themselves
members of households.
