ECON 200 UOFA FINAL REVIEW
CORRECT 100%
Marginal Thinking - ANSWER requires decision-makers to evaluate whether the benefit
of one more unit of something is greater than its cost
Trade-off - ANSWER the act of giving up one benefit in order to gain another, greater
benefit
Incentives - ANSWER an action or reward that motivates one to act a certain way
normative statement - ANSWER A statement that is an opinion
positive statement - ANSWER A statement that is testable
elasticity of demand - ANSWER a measure of how consumers react to a change in
price
elasticity of demand formula - ANSWER % change in quantity demanded / % change in
price
perfectly elastic demand - ANSWER a horizontal line, any price increase reduces QD to
zero, elasticity has an absolute value of infinity
relatively elastic demand - ANSWER the elasticity coefficient value is >1
unit elastic - ANSWER when the percentage change in price and quantity demanded
are the same. Absolute value = 1
perfectly inelastic - ANSWER E=0 (vertical line)
relatively inelastic - ANSWER Greater than zero, less than one
Factors Causing a Shift in the Demand Curve - ANSWER - substitutes
- long term or short term (the time period)
- percentage of consumer income
- brand loyalty
- peak / off peak times
- whether a good is a luxury or a necessity
Factors Causing a Shift in the Supply Curve - ANSWER - Weather/ environment
- Number of Sellers or Producers
- Cost of Production
- Expectations
, - Government Regulation
- Substitutes
- Complements
Effects of taxes - ANSWER -discourage production and consumption of the good that is
taxed
Total Revenue - ANSWER the total amount of money a firm receives by selling goods
or services. Price x Quantity
Total Revenue Test (Inelastic) - ANSWER Price Increases, Total Revenue Increases.
Price Decreases, Total Revenue Decreases
Total Revenue Test (Elastic) - ANSWER Price Increases, Total Revenue Decreases.
Price Decreases, Total Revenue Increases
Externalities - ANSWER A side effect of an action that affects a third party other than
the buyer or seller.
Private Good - ANSWER a good that is both rival and excludable
Public Good - ANSWER Goods that are neither excludable nor rival in consumption
Club Good - ANSWER non-rival but excludable
Common Resources - ANSWER rival but not excludable
Free Rider Problem - ANSWER the problem faced by interest groups when citizens can
reap the benefits of interest group action without actually joining, participating in, or
contributing money to such groups.
Private costs - ANSWER Costs incurred solely by an individual or firm as a result of
their own activities
Private Benefits - ANSWER Benefits enjoyed solely by an individual or firm as a result
of their own activities
Social costs and benefits - ANSWER costs and benefits to society as a whole rather
than to the business
Production Process - ANSWER the activities, equipment, and resources needed to
manufacture a product
Economic Scale - ANSWER factors that cause a producer's average cost per unit to fall
as output rises
CORRECT 100%
Marginal Thinking - ANSWER requires decision-makers to evaluate whether the benefit
of one more unit of something is greater than its cost
Trade-off - ANSWER the act of giving up one benefit in order to gain another, greater
benefit
Incentives - ANSWER an action or reward that motivates one to act a certain way
normative statement - ANSWER A statement that is an opinion
positive statement - ANSWER A statement that is testable
elasticity of demand - ANSWER a measure of how consumers react to a change in
price
elasticity of demand formula - ANSWER % change in quantity demanded / % change in
price
perfectly elastic demand - ANSWER a horizontal line, any price increase reduces QD to
zero, elasticity has an absolute value of infinity
relatively elastic demand - ANSWER the elasticity coefficient value is >1
unit elastic - ANSWER when the percentage change in price and quantity demanded
are the same. Absolute value = 1
perfectly inelastic - ANSWER E=0 (vertical line)
relatively inelastic - ANSWER Greater than zero, less than one
Factors Causing a Shift in the Demand Curve - ANSWER - substitutes
- long term or short term (the time period)
- percentage of consumer income
- brand loyalty
- peak / off peak times
- whether a good is a luxury or a necessity
Factors Causing a Shift in the Supply Curve - ANSWER - Weather/ environment
- Number of Sellers or Producers
- Cost of Production
- Expectations
, - Government Regulation
- Substitutes
- Complements
Effects of taxes - ANSWER -discourage production and consumption of the good that is
taxed
Total Revenue - ANSWER the total amount of money a firm receives by selling goods
or services. Price x Quantity
Total Revenue Test (Inelastic) - ANSWER Price Increases, Total Revenue Increases.
Price Decreases, Total Revenue Decreases
Total Revenue Test (Elastic) - ANSWER Price Increases, Total Revenue Decreases.
Price Decreases, Total Revenue Increases
Externalities - ANSWER A side effect of an action that affects a third party other than
the buyer or seller.
Private Good - ANSWER a good that is both rival and excludable
Public Good - ANSWER Goods that are neither excludable nor rival in consumption
Club Good - ANSWER non-rival but excludable
Common Resources - ANSWER rival but not excludable
Free Rider Problem - ANSWER the problem faced by interest groups when citizens can
reap the benefits of interest group action without actually joining, participating in, or
contributing money to such groups.
Private costs - ANSWER Costs incurred solely by an individual or firm as a result of
their own activities
Private Benefits - ANSWER Benefits enjoyed solely by an individual or firm as a result
of their own activities
Social costs and benefits - ANSWER costs and benefits to society as a whole rather
than to the business
Production Process - ANSWER the activities, equipment, and resources needed to
manufacture a product
Economic Scale - ANSWER factors that cause a producer's average cost per unit to fall
as output rises
