Economics Exam 1 Study Guide UPDATED ACTUAL QUESTIONS AND CORRECT
ANSWERS
Economics is a social science because it applies the scientific method to the study of the interactions among individuals.
it considers human behaviorlong dash—particularly decision-making behavior.
it is based on studying the actions of individuals.
Which of the following statements about scarcity is true? Scarcity refers to the situation in which unlimited wants exceed limited resources.
Voluntary exchange increases economic efficiency because neither the buyer nor the seller would agree to a trade unless they both
benefit.
Microsoft charges a price of $599 for a copy of Windows When we assume the managers at Microsoft have used all available information
7. Is this pricing decision rational? and have weighed all known benefits and costs, we are assuming rationality.
Competition forces firms to produce and sell products as marginal benefit; marginal cost
long as the ________ to consumers exceeds the of
production.
When the federal government crafts environmental the policies are consistent with economic incentives.
policies that make it less expensive for firms to follow
green initiatives,
The idea that because of scarcity, producing more of one trade-off.
good or service means producing less of another good
or service refers to the economic concept of
Which of the following is a macroeconomics question? What determines the growth rate of gross domestic product?
, Trade-offs force society to make choices, particularly One, what goods and services will be produced? Two, how will the goods and
when answering the following three fundamental services be produced? Three, who will receive the goods and services produced?
questions:
Microeconomics is the study of how households and firms make choices, how they interact in markets, and how
the government attempts to influence their choices
Refer to the figure to the right. One segment of the E = households; F = product markets
circular flow diagram shows the flow of funds from
economic agents E to market F. Who are economic
agents E and what is market F?
A free market exists when the government places few restrictions on how a good or a service can be
produced or sold or on how a factor of production can be employed.
Estonia 5 board feet of lumber
40 hours - One Cell Phone
8 hours - Lumber (per board foot)
Finland
16 hours - One Cell Phone
4 hours - Lumber (per board foot)
The table above shows the number of labor hours
required to produce a cell phone and a board foot of
lumber in Estonia and Finland.
What is Estonia's opportunity cost of producing one cell
phone?
In the diagram to the right, point F indicates an (F IS inefficient result.
BELOW the efficient result)
Your consumption point afterafter trade is illustrated by C -above the efficient point
point
Suppose the economy whose PPF is shown on the right Brand new line with the point B on the new line
experiences economic growth.
1.) Use the 3-point curved line drawing tool to show how
growth affects the trade-offs the country faces between
producing ships and food.
2.) Use the point drawing tool to draw and label a point
on the new PPF that shows the economy producing more
of both goods. Label this point 'B'.
Which of the following may have caused the shift you An increase in the capital stock.
have drawn?
A larger labor force.
Advances in technology.
ANSWERS
Economics is a social science because it applies the scientific method to the study of the interactions among individuals.
it considers human behaviorlong dash—particularly decision-making behavior.
it is based on studying the actions of individuals.
Which of the following statements about scarcity is true? Scarcity refers to the situation in which unlimited wants exceed limited resources.
Voluntary exchange increases economic efficiency because neither the buyer nor the seller would agree to a trade unless they both
benefit.
Microsoft charges a price of $599 for a copy of Windows When we assume the managers at Microsoft have used all available information
7. Is this pricing decision rational? and have weighed all known benefits and costs, we are assuming rationality.
Competition forces firms to produce and sell products as marginal benefit; marginal cost
long as the ________ to consumers exceeds the of
production.
When the federal government crafts environmental the policies are consistent with economic incentives.
policies that make it less expensive for firms to follow
green initiatives,
The idea that because of scarcity, producing more of one trade-off.
good or service means producing less of another good
or service refers to the economic concept of
Which of the following is a macroeconomics question? What determines the growth rate of gross domestic product?
, Trade-offs force society to make choices, particularly One, what goods and services will be produced? Two, how will the goods and
when answering the following three fundamental services be produced? Three, who will receive the goods and services produced?
questions:
Microeconomics is the study of how households and firms make choices, how they interact in markets, and how
the government attempts to influence their choices
Refer to the figure to the right. One segment of the E = households; F = product markets
circular flow diagram shows the flow of funds from
economic agents E to market F. Who are economic
agents E and what is market F?
A free market exists when the government places few restrictions on how a good or a service can be
produced or sold or on how a factor of production can be employed.
Estonia 5 board feet of lumber
40 hours - One Cell Phone
8 hours - Lumber (per board foot)
Finland
16 hours - One Cell Phone
4 hours - Lumber (per board foot)
The table above shows the number of labor hours
required to produce a cell phone and a board foot of
lumber in Estonia and Finland.
What is Estonia's opportunity cost of producing one cell
phone?
In the diagram to the right, point F indicates an (F IS inefficient result.
BELOW the efficient result)
Your consumption point afterafter trade is illustrated by C -above the efficient point
point
Suppose the economy whose PPF is shown on the right Brand new line with the point B on the new line
experiences economic growth.
1.) Use the 3-point curved line drawing tool to show how
growth affects the trade-offs the country faces between
producing ships and food.
2.) Use the point drawing tool to draw and label a point
on the new PPF that shows the economy producing more
of both goods. Label this point 'B'.
Which of the following may have caused the shift you An increase in the capital stock.
have drawn?
A larger labor force.
Advances in technology.
