ECO 2023 Final Exam Questions with All
Solved Solutions 2026-2027 Updated.
What is Economics? - Answer Econ is study of how we make choices (act of selecting
alternatives) under scarcity (concept that there is less of a good freely available from nature
than people would like)
Scarcity - Answer Necessitated rationing (allocating scarce good to those who want them) in a
market economy, price is used to ration goods
& Leads to competitive behavior
Resources - Answer Input used to produce econ good
1. Human Resources (human capital)
2. Physical resources (physical capital)
3. Natural resources
8 Guideposts to Economic thinking - Answer 1. Resources are scarce so decision makers must
make trade-offs (no such thing as a free lunch)
Opportunity Cost: highest valued alternative that must be sacrificed when choosing an option.
8 Guideposts to Economic thinking - Answer 1. Individual are rational: they try to get the most
from their limited resources. "greatest benefit at least possible cost"
8 Guideposts to Economic thinking - Answer 1. Incentives matter: choice influenced in a
predictable way by changing incentives
8 Guideposts to Economic thinking - Answer 1. Individuals make decisions at the margin.
Marginal: describes the effect of a change in the current situation.
Cost- benefits analysis: one will undergo an action when the marginal benefit outweigh the
marginal costs
8 Guideposts to Economic thinking - Answer 1. Information helps us make better choices, but
it costly ex: New car v. New pencil
8 Guideposts to Economic thinking - Answer 1. Beware of secondary effects: economic actions
generate both direct and indirect effects. Secondary Effect: indirect impact of an event or policy
that may be easily and immediately observable.
,8 Guideposts to Economic thinking - Answer 1. Value of a good or service is subjective: moving
goods and services to those who value them most is a primary source of economic progress.
8 Guideposts to Economic thinking - Answer 1. The test of a theory is its ability to predict. If
real world events are consistent with a theory, then that theory is valid.
Positive Econ statements: - Answer Scientific study of what it is (testable)
Normative Econ statements: - Answer Judgements about what ought to be (not testable)
4 pitfalls to void in economic thinking: - Answer 1. Violation of ceteris paribus principle: other
things constant ex: buying roses
2. The belief that good intentions guarantee desirable outcomes.
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 logical error of comparing that actual situation with its idealized
counterpart rather than the actual alternative
How voluntary trade creates value & leads to econ progress: - Answer 1. Gains from
specialization and division of labor
2. Gains from mass production methods
3. Gains from innovation
Transaction costs: - Answer Time, effort, and other resources needed to search out and
complete an exchange
Importance of middlemen: - Answer Person who buys and sells goods or services or arranged
trade. A middleman reduces transaction costs.
Characteristics of private property rights: - Answer 1. Right to exclusive use of property
2. Legal protection against invasion from other individuals
3. Right to sell, transfer, exchange, or mortgage the property.
4 incentives private property rights provide: - Answer 1. Incentive to use resources in ways
that are considered beneficial to others. Owners bear the cost of ignoring the wishes of others.
2. Private owners have an incentive to care for and manage what they own.
, 3. Private owners have an incentive to conserve for the future
4. Private owners have incentive to make sure their property does not damage your property.
Production Possible Curve: - Answer PPC: Outlines all possible combos of total output that
could be produces, assuming a:
1. Fixed amount of production resources
2. Given full amount of technical knowledge
3. full and efficient use of resources
4 Factors that shift the production possibilities curve: - Answer 1. Change in econ's resource
base. investment: the purchase, construction, or development of resources. However,
investment requires us to give up consumption goods.
2. Changes in technology. Technology: knowledge available in an econ at any given time. Tech
determines the amount of output we can generate with our limited resources.
3. Change in rules under which the econ functions.
4. Changes in work habits
Law of Comparative Advantage: - Answer Total output of a group of individuals, an entire
econ, or a group of nations will be greatest when the output of each good is produced bu
whoever has the lowest op cost.
Socialism: - Answer System of econ organization where:
1. Ownership and control of the means of production rest with each state
2. Resource allocation is determined to be centralized planning
Collective decision making: the method of organization that relies on public sector decision
making to the resolve basic econ questions.
Capitalism: - Answer System of econ organization where:
1. Production resources are owned privately
2. Goods and resources are allocated through market prices.
Market Organization: a method of organization in which private parties make their own plans
and decisions with guidance of market prices
Law of Demand: - Answer An inverse (negative) relationship between the price of a good and
the quantity that buyers are willing to purchase. Results in a downward sloping demand curve.
Solved Solutions 2026-2027 Updated.
What is Economics? - Answer Econ is study of how we make choices (act of selecting
alternatives) under scarcity (concept that there is less of a good freely available from nature
than people would like)
Scarcity - Answer Necessitated rationing (allocating scarce good to those who want them) in a
market economy, price is used to ration goods
& Leads to competitive behavior
Resources - Answer Input used to produce econ good
1. Human Resources (human capital)
2. Physical resources (physical capital)
3. Natural resources
8 Guideposts to Economic thinking - Answer 1. Resources are scarce so decision makers must
make trade-offs (no such thing as a free lunch)
Opportunity Cost: highest valued alternative that must be sacrificed when choosing an option.
8 Guideposts to Economic thinking - Answer 1. Individual are rational: they try to get the most
from their limited resources. "greatest benefit at least possible cost"
8 Guideposts to Economic thinking - Answer 1. Incentives matter: choice influenced in a
predictable way by changing incentives
8 Guideposts to Economic thinking - Answer 1. Individuals make decisions at the margin.
Marginal: describes the effect of a change in the current situation.
Cost- benefits analysis: one will undergo an action when the marginal benefit outweigh the
marginal costs
8 Guideposts to Economic thinking - Answer 1. Information helps us make better choices, but
it costly ex: New car v. New pencil
8 Guideposts to Economic thinking - Answer 1. Beware of secondary effects: economic actions
generate both direct and indirect effects. Secondary Effect: indirect impact of an event or policy
that may be easily and immediately observable.
,8 Guideposts to Economic thinking - Answer 1. Value of a good or service is subjective: moving
goods and services to those who value them most is a primary source of economic progress.
8 Guideposts to Economic thinking - Answer 1. The test of a theory is its ability to predict. If
real world events are consistent with a theory, then that theory is valid.
Positive Econ statements: - Answer Scientific study of what it is (testable)
Normative Econ statements: - Answer Judgements about what ought to be (not testable)
4 pitfalls to void in economic thinking: - Answer 1. Violation of ceteris paribus principle: other
things constant ex: buying roses
2. The belief that good intentions guarantee desirable outcomes.
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 logical error of comparing that actual situation with its idealized
counterpart rather than the actual alternative
How voluntary trade creates value & leads to econ progress: - Answer 1. Gains from
specialization and division of labor
2. Gains from mass production methods
3. Gains from innovation
Transaction costs: - Answer Time, effort, and other resources needed to search out and
complete an exchange
Importance of middlemen: - Answer Person who buys and sells goods or services or arranged
trade. A middleman reduces transaction costs.
Characteristics of private property rights: - Answer 1. Right to exclusive use of property
2. Legal protection against invasion from other individuals
3. Right to sell, transfer, exchange, or mortgage the property.
4 incentives private property rights provide: - Answer 1. Incentive to use resources in ways
that are considered beneficial to others. Owners bear the cost of ignoring the wishes of others.
2. Private owners have an incentive to care for and manage what they own.
, 3. Private owners have an incentive to conserve for the future
4. Private owners have incentive to make sure their property does not damage your property.
Production Possible Curve: - Answer PPC: Outlines all possible combos of total output that
could be produces, assuming a:
1. Fixed amount of production resources
2. Given full amount of technical knowledge
3. full and efficient use of resources
4 Factors that shift the production possibilities curve: - Answer 1. Change in econ's resource
base. investment: the purchase, construction, or development of resources. However,
investment requires us to give up consumption goods.
2. Changes in technology. Technology: knowledge available in an econ at any given time. Tech
determines the amount of output we can generate with our limited resources.
3. Change in rules under which the econ functions.
4. Changes in work habits
Law of Comparative Advantage: - Answer Total output of a group of individuals, an entire
econ, or a group of nations will be greatest when the output of each good is produced bu
whoever has the lowest op cost.
Socialism: - Answer System of econ organization where:
1. Ownership and control of the means of production rest with each state
2. Resource allocation is determined to be centralized planning
Collective decision making: the method of organization that relies on public sector decision
making to the resolve basic econ questions.
Capitalism: - Answer System of econ organization where:
1. Production resources are owned privately
2. Goods and resources are allocated through market prices.
Market Organization: a method of organization in which private parties make their own plans
and decisions with guidance of market prices
Law of Demand: - Answer An inverse (negative) relationship between the price of a good and
the quantity that buyers are willing to purchase. Results in a downward sloping demand curve.
