Economics 101 Exam 1 - SDSU Cullivan(with Accurate
answers)
Microeconomics correct answers the study of the economy at the small-scale level, examining
individuals and specifics markets
-deals with individual households and markets (gasoline market)
-how market prices are determined and how they will adjust to a variety of different events
(weather and government regulation)
Macroeconomics correct answers The study of the economy at the large-scale level, examining
total output, the price level, and other aggregate measures of the economy
-examines entire economy of a state, a country, or the world
-deals with large-scale issues of an economy like total output, average price levels (and inflation)
and unemployment
-the whole economy can be affected by important national and global events (wars, natural
disasters, and technological innovation, decisions made by government policy makers)
Aggregate correct answers Means "total"
-Used in macroeconomics (aggregation)
Aggregation correct answers In macroeconomics:
-Adds up output across all industries
-Adds up prices to arrive at one measure of how expensive goods and services are this year
compared to last year
-Adds up data about whos employed and who isn't so we know the state of all labor markets and
develop a measure of the unemployment rate
Economics correct answers The study of how individuals and societies allocate scarce resources
among many competing uses
Resource correct answers Any item, whether a gift of nature, the result of production, or the
result of human effort, that is used to produce goods and services
Land correct answers All natural resources used in production; sometimes referred to as "gifts of
nature"
Labor correct answers All physical and mental activity devoted to producing goods and services
Capital correct answers The tools, machinery, infrastructure and knowledge used to produce
goods and services.
-Sometimes divided into "physical" and "human"
Physical capital correct answers refers to tangible items that are created to increase productivity
Human capital correct answers refers to the knowledge and skills that people acquire in order to
increase productivity
, Entrepreneurial ability correct answers The talent or ability to combine land, labor, and capital to
produce goods and services.
-Different from human capital and in that it primarily involves assuming risk and organizing
resources into a productive process
Scarcity correct answers A condition that results from the inability of limited resources to satisfy
unlimited wants
-reflects the fact that unlimited wants cannot be completely satisfied with limited resources
Relative scarcity correct answers The comparison of the scarcity of one good, service or resource
to that of another
(relative scarcity of drinkable water as compared to water in general)
Allocation correct answers The process of assigning a good, service, or resource to one use
instead of another
(proposal that would change the allocation of public space for recreational use by demolishing a
skating park and building an arboretum)
Opportunity Cost correct answers The value of the next-best forgone alternative; the value of the
opportunity that you gave up when you chose one activity, or opportunity, instead of another
-Exist because of scarcity
Self-interest correct answers The idea that people choose to do the things that interest them
Marginal benefit correct answers The additional benefit associated with 1 more unit of an
activity
Marginal cost correct answers The additional cost associated with 1 more unit of an activity
Marginal decision making correct answers The process of making choices in increments by
evaluating the additional, or marginal, benefit against the additional, or marginal, cost of an
action
Optimization correct answers The idea that people make choices in order to maximize the overall
benefit, or utility, of an action subject to its cost; people will engage in an activity as long as the
marginal benefit of an activity is greater than or equal to its marginal cost
Decreasing marginal benefit correct answers The negative relationship between the marginal
benefit associated with the use of a good or service and the quanitity consumed; the more of a
good or service that is consumed, in a given period of time, the lower the marginal benefit
associated with each additional unit
Increasing marginal cost correct answers The postive relationship between the marginal cost
associated with the use of a good or service and the quanitity produced; the more of a good or
answers)
Microeconomics correct answers the study of the economy at the small-scale level, examining
individuals and specifics markets
-deals with individual households and markets (gasoline market)
-how market prices are determined and how they will adjust to a variety of different events
(weather and government regulation)
Macroeconomics correct answers The study of the economy at the large-scale level, examining
total output, the price level, and other aggregate measures of the economy
-examines entire economy of a state, a country, or the world
-deals with large-scale issues of an economy like total output, average price levels (and inflation)
and unemployment
-the whole economy can be affected by important national and global events (wars, natural
disasters, and technological innovation, decisions made by government policy makers)
Aggregate correct answers Means "total"
-Used in macroeconomics (aggregation)
Aggregation correct answers In macroeconomics:
-Adds up output across all industries
-Adds up prices to arrive at one measure of how expensive goods and services are this year
compared to last year
-Adds up data about whos employed and who isn't so we know the state of all labor markets and
develop a measure of the unemployment rate
Economics correct answers The study of how individuals and societies allocate scarce resources
among many competing uses
Resource correct answers Any item, whether a gift of nature, the result of production, or the
result of human effort, that is used to produce goods and services
Land correct answers All natural resources used in production; sometimes referred to as "gifts of
nature"
Labor correct answers All physical and mental activity devoted to producing goods and services
Capital correct answers The tools, machinery, infrastructure and knowledge used to produce
goods and services.
-Sometimes divided into "physical" and "human"
Physical capital correct answers refers to tangible items that are created to increase productivity
Human capital correct answers refers to the knowledge and skills that people acquire in order to
increase productivity
, Entrepreneurial ability correct answers The talent or ability to combine land, labor, and capital to
produce goods and services.
-Different from human capital and in that it primarily involves assuming risk and organizing
resources into a productive process
Scarcity correct answers A condition that results from the inability of limited resources to satisfy
unlimited wants
-reflects the fact that unlimited wants cannot be completely satisfied with limited resources
Relative scarcity correct answers The comparison of the scarcity of one good, service or resource
to that of another
(relative scarcity of drinkable water as compared to water in general)
Allocation correct answers The process of assigning a good, service, or resource to one use
instead of another
(proposal that would change the allocation of public space for recreational use by demolishing a
skating park and building an arboretum)
Opportunity Cost correct answers The value of the next-best forgone alternative; the value of the
opportunity that you gave up when you chose one activity, or opportunity, instead of another
-Exist because of scarcity
Self-interest correct answers The idea that people choose to do the things that interest them
Marginal benefit correct answers The additional benefit associated with 1 more unit of an
activity
Marginal cost correct answers The additional cost associated with 1 more unit of an activity
Marginal decision making correct answers The process of making choices in increments by
evaluating the additional, or marginal, benefit against the additional, or marginal, cost of an
action
Optimization correct answers The idea that people make choices in order to maximize the overall
benefit, or utility, of an action subject to its cost; people will engage in an activity as long as the
marginal benefit of an activity is greater than or equal to its marginal cost
Decreasing marginal benefit correct answers The negative relationship between the marginal
benefit associated with the use of a good or service and the quanitity consumed; the more of a
good or service that is consumed, in a given period of time, the lower the marginal benefit
associated with each additional unit
Increasing marginal cost correct answers The postive relationship between the marginal cost
associated with the use of a good or service and the quanitity produced; the more of a good or
