ECON 102 Exam 1 Questions with 100% Correct
Answers
False
True or False: When both the demand and supply curve shift, the curve that shifts with the
smaller magnitude determines the effect on the undetermined equilibrium object.
False
True or False: When both the demand and supply curve shift, you can always determine the
effect on price and quantity without knowing the magnitude of the shifts.
True
True or False: Value of the price elasticity of demand is not equal to the slope of the demand
curve
Overall increase in production for both parties and they will obtain consumption outside
the PPF
Happens when two individuals produce efficiently and then make a mutually beneficial trade
based on comparative advantage.
Scientific Method
Dispassionate development and testing of theories about how the world works.
Model
, Highly simplified representation of a more complicated reality.
-Used to study economic issues
-i.e. Road map, model of human anatomy, model airplane
Circular - Flow Diagram
Visual model of economy, shows how dollars flow through markets among households and
firms.
Households
1. Own factors of production, sell/rent to firms for income.
2. Buy and consume goods and services.
Firms
1. Buy/hire factors of production, used to produce goods and services.
2. Sells goods and services
Factors of Production
The resources the economy uses to produce goods and services.
- i.e. Land, Labor, and Capital (buildings and machines used in production)
Production Possibilities Frontier (PPF)
Graph showing the combinations of 2 goods economy can possibly produce given available
resources and available technology.
Bow Shaped
Answers
False
True or False: When both the demand and supply curve shift, the curve that shifts with the
smaller magnitude determines the effect on the undetermined equilibrium object.
False
True or False: When both the demand and supply curve shift, you can always determine the
effect on price and quantity without knowing the magnitude of the shifts.
True
True or False: Value of the price elasticity of demand is not equal to the slope of the demand
curve
Overall increase in production for both parties and they will obtain consumption outside
the PPF
Happens when two individuals produce efficiently and then make a mutually beneficial trade
based on comparative advantage.
Scientific Method
Dispassionate development and testing of theories about how the world works.
Model
, Highly simplified representation of a more complicated reality.
-Used to study economic issues
-i.e. Road map, model of human anatomy, model airplane
Circular - Flow Diagram
Visual model of economy, shows how dollars flow through markets among households and
firms.
Households
1. Own factors of production, sell/rent to firms for income.
2. Buy and consume goods and services.
Firms
1. Buy/hire factors of production, used to produce goods and services.
2. Sells goods and services
Factors of Production
The resources the economy uses to produce goods and services.
- i.e. Land, Labor, and Capital (buildings and machines used in production)
Production Possibilities Frontier (PPF)
Graph showing the combinations of 2 goods economy can possibly produce given available
resources and available technology.
Bow Shaped
