ECON 110 EXAM 1QUESTIONS AND
CORRECT ANSWERS
Optimal Decision ✅✅CORRECT ANSW-When marginal benefit(MB) = marginal cost(MC).
Marginal analysis ✅✅CORRECT ANSW-When you weigh Marginal Benefit and Marginal Cost
Trade off ✅✅CORRECT ANSW-When you produce more of one thing and less of another.
Opportunity Cost ✅✅CORRECT ANSW-Is the highest valued alternative that must be given up to
engage in that activity. ( whatever you give up in willing to get something else).
What goods and services will be produced? ✅✅CORRECT ANSW-By using consumer sovereignty,
when you buy something it tells producers that they should produce more. Consumers and firms
make that decision.
Market ✅✅CORRECT ANSW-a group of buyers and sellers a good service and the institution or
arrangement by which they come together to trade.( no agreement on price means no market )
Scarcity ✅✅CORRECT ANSW-A situation in which unlimited wants exceed the limited resources
available to fulfill those wants.
Economics ✅✅CORRECT ANSW-The study of the choices people make to attain their goals, given
their scarce resources.
Being Rational ✅✅CORRECT ANSW-Using all available information to achieve their goals.
How will goods be produced? ✅✅CORRECT ANSW-When, Where, How. Face trade offs
Who will receive the goods and services? ✅✅CORRECT ANSW-Generally people with higher
income. But whoever is willing and able to pay for it.
Centrally Planned Economy ✅✅CORRECT ANSW-An economy in which the government decides
how economic resources will be allocated.
, Market Economy ✅✅CORRECT ANSW-An economy in which the decisions of households and
firms interacting in markets allocate economic resources.
Mixed Economy ✅✅CORRECT ANSW-An economy in which most economic decision result form
the interaction of buyers and sellers in markets but in which the government plays a significant role
in the allocation of resources.
Productive Efficiency ✅✅CORRECT ANSW-Where goods or services are produced at the lowest
possible cost.
Allocative Efficiency ✅✅CORRECT ANSW-Where production is in accordance with consumer
preferences, in particular, every good or service is produced up to the point where the last unit
provides a marginal benefit to society equal to the marginal cost of producing it.
Voluntary Exchange ✅✅CORRECT ANSW-A situation that occurs in markets when both the buyer
and the seller of a product are made better off by the transaction.
Equity ✅✅CORRECT ANSW-The fair distribution of economic benefits.
Why do Economists use models? ✅✅CORRECT ANSW-To answer questions
Economic Variable ✅✅CORRECT ANSW-Something measurable that can have different values,
such as the incomes of doctors.
Positive Analysis ✅✅CORRECT ANSW-Analysis concerned with what is. Economists mostly
preform positive analysis.
Normative Analysis ✅✅CORRECT ANSW-Analysis concerned with what ought to be.
Microeconomics ✅✅CORRECT ANSW-The study of how households and firms make choices, how
they interact in markets, and how the government attempts to influence their choices.
CORRECT ANSWERS
Optimal Decision ✅✅CORRECT ANSW-When marginal benefit(MB) = marginal cost(MC).
Marginal analysis ✅✅CORRECT ANSW-When you weigh Marginal Benefit and Marginal Cost
Trade off ✅✅CORRECT ANSW-When you produce more of one thing and less of another.
Opportunity Cost ✅✅CORRECT ANSW-Is the highest valued alternative that must be given up to
engage in that activity. ( whatever you give up in willing to get something else).
What goods and services will be produced? ✅✅CORRECT ANSW-By using consumer sovereignty,
when you buy something it tells producers that they should produce more. Consumers and firms
make that decision.
Market ✅✅CORRECT ANSW-a group of buyers and sellers a good service and the institution or
arrangement by which they come together to trade.( no agreement on price means no market )
Scarcity ✅✅CORRECT ANSW-A situation in which unlimited wants exceed the limited resources
available to fulfill those wants.
Economics ✅✅CORRECT ANSW-The study of the choices people make to attain their goals, given
their scarce resources.
Being Rational ✅✅CORRECT ANSW-Using all available information to achieve their goals.
How will goods be produced? ✅✅CORRECT ANSW-When, Where, How. Face trade offs
Who will receive the goods and services? ✅✅CORRECT ANSW-Generally people with higher
income. But whoever is willing and able to pay for it.
Centrally Planned Economy ✅✅CORRECT ANSW-An economy in which the government decides
how economic resources will be allocated.
, Market Economy ✅✅CORRECT ANSW-An economy in which the decisions of households and
firms interacting in markets allocate economic resources.
Mixed Economy ✅✅CORRECT ANSW-An economy in which most economic decision result form
the interaction of buyers and sellers in markets but in which the government plays a significant role
in the allocation of resources.
Productive Efficiency ✅✅CORRECT ANSW-Where goods or services are produced at the lowest
possible cost.
Allocative Efficiency ✅✅CORRECT ANSW-Where production is in accordance with consumer
preferences, in particular, every good or service is produced up to the point where the last unit
provides a marginal benefit to society equal to the marginal cost of producing it.
Voluntary Exchange ✅✅CORRECT ANSW-A situation that occurs in markets when both the buyer
and the seller of a product are made better off by the transaction.
Equity ✅✅CORRECT ANSW-The fair distribution of economic benefits.
Why do Economists use models? ✅✅CORRECT ANSW-To answer questions
Economic Variable ✅✅CORRECT ANSW-Something measurable that can have different values,
such as the incomes of doctors.
Positive Analysis ✅✅CORRECT ANSW-Analysis concerned with what is. Economists mostly
preform positive analysis.
Normative Analysis ✅✅CORRECT ANSW-Analysis concerned with what ought to be.
Microeconomics ✅✅CORRECT ANSW-The study of how households and firms make choices, how
they interact in markets, and how the government attempts to influence their choices.
