Eco 2023 Final Exam Questions with All
Detailed Answers 2026-2027 Updated.
economics - Answer study of how we make choices under scarcity
choice - Answer the act of selecting among alternatives
scarcity - Answer the concept that there is less of a good freely available from nature than
people would like
-not the same thing as poverty
-necessitate rationing-price is used
-leads to competitive behavior
rationing - Answer allocating scarce goods to those who want them
resources - Answer an input that is used to produce an economic good
1. human resources
2. physical resources
3. natural resources
capital - Answer human made resources used to produce other goods and services
8 guideposts to economic thinking - Answer 1. resources are scarce so decision makers must
make trade-offs
2. individuals are rational
3. incentives matter
4. individuals make decisions at the margin
5. information helps us make better choices but is costly
6. beware of secondary effects:economic actions generate both direct and indirect effects
7. the value of a good or service is subjective
8. the test of a theory is its ability to predict
opportunity cost - Answer highest valued alternative that must be sacrificed when choosing an
option
,marginal - Answer describes the effect of a change in the current situation; ex: supersizing
meals
cost benefit analysis - Answer one will undergo an action when the marginal benefits
outweigh the marginal costs
secondary effect - Answer the indirect impact of an event or policy that may not be easily and
immediately observable; ex: tax or trade restrictions
positive economics - Answer testable
normative economics - Answer not testable
4 pitfalls to avoid in economic thinking - Answer 1. validation of ceteris paribus principle: other
things constant
2. the belief that good intentions guarantee desirable outcomes: nirvana fallacy
3. the belief that association is causation
4. fallacy of composition-the fallacious belief that what is true for one is true for all
nirvana fallacy - Answer the logical error of comparing the actual situation with its idealized
counterpart rather than the actual alternative
microeconomics - Answer focuses on how human behavior affects the conduct of affairs
within individually defined units such as households or firms (trees)
macroeconomics - Answer focuses on how human behavior affects outcomes in highly
aggregated markets such as the nations market for labor (forest)
coercion - Answer someone will devote resources to make you worse off in you dont comply
how trade creates value - Answer 1. when individuals engage in voluntary exchange both
parties are made better off
2. by channeling goods and resources to those who value them most trade creates value and
increases the weath created by a society's resources
how trade leads to economic progress - Answer 1. gains from specialization and division of
labor
2. gains from mass production methods
, 3. gains from innovation
creation of wealth - Answer the process by which some people become rich will make
everybody richer
transaction costs - Answer the time, effort, and other resources needed to search out and
complete and exchange
middleman - Answer a person who buys and sells goods or services or arrange trades; reduces
transaction costs
importance of property rights - Answer ex:women in his neighborhood
1. right to exclusive use of the property
2. legal protection against invasion from other individuals
3. the right to sell, transfer, exchange or mortgage the property
four incentives of property rights - Answer 1. incentive to use resources in ways that are
considered beneficial to others
2. to care for and manage what they own
3. to conserve for the future
4. to make sure their property does not damage your property
lack of property rights - Answer lack of economic progress
production possibilities curve - Answer outlines all possible combinations of total output that
could be produced assuring:
1. a fixed amount of productive resources
2. given amount of technical knowledge
3. full and efficient use or resources
bowed outward because of the concept of increasing opportunity costs
ppc slope - Answer indicates the amount of one good that must be given up to produce more
of the other good
unattainable - Answer points outside the curve
inefficient - Answer points within the curve
Detailed Answers 2026-2027 Updated.
economics - Answer study of how we make choices under scarcity
choice - Answer the act of selecting among alternatives
scarcity - Answer the concept that there is less of a good freely available from nature than
people would like
-not the same thing as poverty
-necessitate rationing-price is used
-leads to competitive behavior
rationing - Answer allocating scarce goods to those who want them
resources - Answer an input that is used to produce an economic good
1. human resources
2. physical resources
3. natural resources
capital - Answer human made resources used to produce other goods and services
8 guideposts to economic thinking - Answer 1. resources are scarce so decision makers must
make trade-offs
2. individuals are rational
3. incentives matter
4. individuals make decisions at the margin
5. information helps us make better choices but is costly
6. beware of secondary effects:economic actions generate both direct and indirect effects
7. the value of a good or service is subjective
8. the test of a theory is its ability to predict
opportunity cost - Answer highest valued alternative that must be sacrificed when choosing an
option
,marginal - Answer describes the effect of a change in the current situation; ex: supersizing
meals
cost benefit analysis - Answer one will undergo an action when the marginal benefits
outweigh the marginal costs
secondary effect - Answer the indirect impact of an event or policy that may not be easily and
immediately observable; ex: tax or trade restrictions
positive economics - Answer testable
normative economics - Answer not testable
4 pitfalls to avoid in economic thinking - Answer 1. validation of ceteris paribus principle: other
things constant
2. the belief that good intentions guarantee desirable outcomes: nirvana fallacy
3. the belief that association is causation
4. fallacy of composition-the fallacious belief that what is true for one is true for all
nirvana fallacy - Answer the logical error of comparing the actual situation with its idealized
counterpart rather than the actual alternative
microeconomics - Answer focuses on how human behavior affects the conduct of affairs
within individually defined units such as households or firms (trees)
macroeconomics - Answer focuses on how human behavior affects outcomes in highly
aggregated markets such as the nations market for labor (forest)
coercion - Answer someone will devote resources to make you worse off in you dont comply
how trade creates value - Answer 1. when individuals engage in voluntary exchange both
parties are made better off
2. by channeling goods and resources to those who value them most trade creates value and
increases the weath created by a society's resources
how trade leads to economic progress - Answer 1. gains from specialization and division of
labor
2. gains from mass production methods
, 3. gains from innovation
creation of wealth - Answer the process by which some people become rich will make
everybody richer
transaction costs - Answer the time, effort, and other resources needed to search out and
complete and exchange
middleman - Answer a person who buys and sells goods or services or arrange trades; reduces
transaction costs
importance of property rights - Answer ex:women in his neighborhood
1. right to exclusive use of the property
2. legal protection against invasion from other individuals
3. the right to sell, transfer, exchange or mortgage the property
four incentives of property rights - Answer 1. incentive to use resources in ways that are
considered beneficial to others
2. to care for and manage what they own
3. to conserve for the future
4. to make sure their property does not damage your property
lack of property rights - Answer lack of economic progress
production possibilities curve - Answer outlines all possible combinations of total output that
could be produced assuring:
1. a fixed amount of productive resources
2. given amount of technical knowledge
3. full and efficient use or resources
bowed outward because of the concept of increasing opportunity costs
ppc slope - Answer indicates the amount of one good that must be given up to produce more
of the other good
unattainable - Answer points outside the curve
inefficient - Answer points within the curve
