ECN 221 Schumann Final Exam Study Guide 2026 | Economics Review & Practice
Questions
What is economics the study of? - ✔✔Choices
Why do we have to make choices? - ✔✔Resources are scarce
Micro vs Macro - ✔✔Micro- Analyzing choices by individuals, households, and businesses.
Macro-Analyzing choices by governments, trade, inflation, money supply, GDP, and societies.
Opportunity Cost - ✔✔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 - ✔✔using all tools such as math, statistics, ect in an objective way to
understand cause and effect (search for the truth)
Normative analysis - ✔✔subjective statements or questions about how it *should be*
contrasts positive
Marginal analysis - ✔✔comparing the additional benefits and additional costs from each unit
of something (to find best quantity use The principle of diminishing benefits)
Marginal Cost - ✔✔for a buyer it's the same as price per unit (pizza $2.00)
Marginal Benefits - ✔✔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 - ✔✔Consume all units for which MB>MC
, 4 Decision Pitfalls - ✔✔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 - ✔✔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 - ✔✔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
Production Possibilities Model - ✔✔A model showing how a nation can use it's productive
resources (land, labor, capital) to produce different combinations of goods.
Physical Capital - ✔✔Desks, computers, Buildings, ect.
Human Capital - ✔✔peoples ability to transform goods to other goods.
Specialized inputs - ✔✔can effect production possibilities
Production possibility curve - ✔✔-A line that shows all combinations of 2 goods that can be
produced using all available resources
Questions
What is economics the study of? - ✔✔Choices
Why do we have to make choices? - ✔✔Resources are scarce
Micro vs Macro - ✔✔Micro- Analyzing choices by individuals, households, and businesses.
Macro-Analyzing choices by governments, trade, inflation, money supply, GDP, and societies.
Opportunity Cost - ✔✔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 - ✔✔using all tools such as math, statistics, ect in an objective way to
understand cause and effect (search for the truth)
Normative analysis - ✔✔subjective statements or questions about how it *should be*
contrasts positive
Marginal analysis - ✔✔comparing the additional benefits and additional costs from each unit
of something (to find best quantity use The principle of diminishing benefits)
Marginal Cost - ✔✔for a buyer it's the same as price per unit (pizza $2.00)
Marginal Benefits - ✔✔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 - ✔✔Consume all units for which MB>MC
, 4 Decision Pitfalls - ✔✔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 - ✔✔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 - ✔✔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
Production Possibilities Model - ✔✔A model showing how a nation can use it's productive
resources (land, labor, capital) to produce different combinations of goods.
Physical Capital - ✔✔Desks, computers, Buildings, ect.
Human Capital - ✔✔peoples ability to transform goods to other goods.
Specialized inputs - ✔✔can effect production possibilities
Production possibility curve - ✔✔-A line that shows all combinations of 2 goods that can be
produced using all available resources
