ECON 2010 MIDTERM 1 QUESTIONS
AND CORRECT ANSWERS
School principal lump sum vs rated fine example ✅✅CORRECT ANSW-If you're a principal, a rated
fine would be more effective than a lump-sum fine for punishing parents late picking up their kids,
because rates affect behavior on margin
Rated financial penalties affects behavior _____ ✅✅CORRECT ANSW-on the margin
3 fundamental questions every economy must address ✅✅CORRECT ANSW-- What goods are
going to be produced?
- How are they going to be produced?
- Who will consume the goods produced?
3 kinds of basic economic systems ✅✅CORRECT ANSW-- Traditional
- Planned/Command/Central planning (socialism)
- Market (Price system)
Friedrick Bastier ✅✅CORRECT ANSW-- Entered Paris, and realized how many people would die if
everyone suddently stopped infrastructure. Thus, "invisible hand".
- Every good has a price at which it can be exchanged
How does money "vote"? ✅✅CORRECT ANSW-Consumers inform producers through "money-
votes" which goods at which prices they decide to purchase
Principle of increasing marginal opportunity cost ✅✅CORRECT ANSW-The more you get of one
thing, the more you have to give up of another relative to a smaller margin
Positive vs. normative ✅✅CORRECT ANSW-Positive is how it "is", normative is "should"
What fact of life is the reason we have the discipline of economics? ✅✅CORRECT ANSW-Scarcity
, Economics is the science of ______________ ✅✅CORRECT ANSW-choice
Difference between economics and socialogy ✅✅CORRECT ANSW-Economics is how people make
choices, sociology considers lack of choices
2 examples of a financial penalty ✅✅CORRECT ANSW-Rated fine, and a lump-sum fine
How to decide "What, how, and whom?" for Market System? ✅✅CORRECT ANSW-- What? ->
Dollar votes
- How? -> Input prices
- Who? -> Those who can and want to pay
Conditions required for market economy to exist ✅✅CORRECT ANSW-- Allowed to work for
wages
- Private property
- Has to be winners and losers
- Markets
3 aspects of private property rights ✅✅CORRECT ANSW-- Exclusion
- Use/consumption of goods
- Tranferrable/trade
What does a technological advancement lead to? ✅✅CORRECT ANSW-- Decrease in input
costs/increase in supply
What determines consumer preference? ✅✅CORRECT ANSW-- Taste
- Level of income
- Price of good
- Price of substitutes/complements
- Consumer expectations
- Taxes and subsidies
AND CORRECT ANSWERS
School principal lump sum vs rated fine example ✅✅CORRECT ANSW-If you're a principal, a rated
fine would be more effective than a lump-sum fine for punishing parents late picking up their kids,
because rates affect behavior on margin
Rated financial penalties affects behavior _____ ✅✅CORRECT ANSW-on the margin
3 fundamental questions every economy must address ✅✅CORRECT ANSW-- What goods are
going to be produced?
- How are they going to be produced?
- Who will consume the goods produced?
3 kinds of basic economic systems ✅✅CORRECT ANSW-- Traditional
- Planned/Command/Central planning (socialism)
- Market (Price system)
Friedrick Bastier ✅✅CORRECT ANSW-- Entered Paris, and realized how many people would die if
everyone suddently stopped infrastructure. Thus, "invisible hand".
- Every good has a price at which it can be exchanged
How does money "vote"? ✅✅CORRECT ANSW-Consumers inform producers through "money-
votes" which goods at which prices they decide to purchase
Principle of increasing marginal opportunity cost ✅✅CORRECT ANSW-The more you get of one
thing, the more you have to give up of another relative to a smaller margin
Positive vs. normative ✅✅CORRECT ANSW-Positive is how it "is", normative is "should"
What fact of life is the reason we have the discipline of economics? ✅✅CORRECT ANSW-Scarcity
, Economics is the science of ______________ ✅✅CORRECT ANSW-choice
Difference between economics and socialogy ✅✅CORRECT ANSW-Economics is how people make
choices, sociology considers lack of choices
2 examples of a financial penalty ✅✅CORRECT ANSW-Rated fine, and a lump-sum fine
How to decide "What, how, and whom?" for Market System? ✅✅CORRECT ANSW-- What? ->
Dollar votes
- How? -> Input prices
- Who? -> Those who can and want to pay
Conditions required for market economy to exist ✅✅CORRECT ANSW-- Allowed to work for
wages
- Private property
- Has to be winners and losers
- Markets
3 aspects of private property rights ✅✅CORRECT ANSW-- Exclusion
- Use/consumption of goods
- Tranferrable/trade
What does a technological advancement lead to? ✅✅CORRECT ANSW-- Decrease in input
costs/increase in supply
What determines consumer preference? ✅✅CORRECT ANSW-- Taste
- Level of income
- Price of good
- Price of substitutes/complements
- Consumer expectations
- Taxes and subsidies
