ECN 801 COMPLETE EXAM REVIEW WITH
FULL SOLUTIONS
●● "Other things equal" assumption
Answer: When analyzing one change, everything else is held constant.
●● Production Possibility Frontier (PPF)
Answer: Shows trade-offs for producing two goods; points on curve =
efficient, inside = inefficient, outside = impossible.
●● Opportunity Cost
Answer: What you give up to get something else.
●● Comparative Advantage
Answer: When someone has a lower opportunity cost in producing a
good.
●● Absolute Advantage
Answer: When someone can produce more with the same resources.
●● Competitive Market
Answer: Many buyers/sellers, identical goods, price-takers.
, ●● Demand Curve
Answer: Shows quantity demanded at each price.
●● Law of Demand
Answer: Price ↑ → quantity demanded ↓.
●● Movement Along Demand Curve
Answer: Caused only by a change in price.
●● Demand Shifters
Answer: Related goods' prices, income, tastes, expectations, number of
consumers.
●● Supply Curve
Answer: Shows quantity supplied at each price.
●● Supply Shifters
Answer: Input prices, technology, expectations, number of producers.
●● Market Equilibrium
Answer: Where supply = demand; no shortage or surplus.
FULL SOLUTIONS
●● "Other things equal" assumption
Answer: When analyzing one change, everything else is held constant.
●● Production Possibility Frontier (PPF)
Answer: Shows trade-offs for producing two goods; points on curve =
efficient, inside = inefficient, outside = impossible.
●● Opportunity Cost
Answer: What you give up to get something else.
●● Comparative Advantage
Answer: When someone has a lower opportunity cost in producing a
good.
●● Absolute Advantage
Answer: When someone can produce more with the same resources.
●● Competitive Market
Answer: Many buyers/sellers, identical goods, price-takers.
, ●● Demand Curve
Answer: Shows quantity demanded at each price.
●● Law of Demand
Answer: Price ↑ → quantity demanded ↓.
●● Movement Along Demand Curve
Answer: Caused only by a change in price.
●● Demand Shifters
Answer: Related goods' prices, income, tastes, expectations, number of
consumers.
●● Supply Curve
Answer: Shows quantity supplied at each price.
●● Supply Shifters
Answer: Input prices, technology, expectations, number of producers.
●● Market Equilibrium
Answer: Where supply = demand; no shortage or surplus.
