Principles of Economics Exam
Questions with Answers
At its core, Economics is about.. - ✔✔individuals (consumers, firms) and governments making
choices given scarce resources
Trade-Offs - ✔✔involve opportunity cost, the value of the best alternative given up
Productive efficiency: - ✔✔Productive efficiency: A situation in which a good or service is
produced at the lowest possible cost
a production possibilities frontier (PPF) - ✔✔A production possibilities frontier (PPF) is a curve
showing the maximum attainable combinations of two products that may be produced with
available resources (e.g. workers, materials, machinery...) and technology.
centrally planned economy - ✔✔an economy in which the government decides how economic
resources will be allocated
market economy - ✔✔the decisions of housholds, firms, and individuals interacting in the
market allocates resources.
mixed economy - ✔✔an economy in which most economic decisions are from the interaction of
buyers and sellers in a market but in which the government plays a significant roll in the
allocation of resources.
microeconomics - ✔✔study of how households and firms make choices in the market, how they
interact. and how the government attempts to influence their interactions
, macroeconomics - ✔✔the study of an economy as a whole, inflation, unemployment and
economic growth.
profit - ✔✔revenue-costs
factors of production/economic resources/input - ✔✔labor, capital, natural resources,
entrepreneurs.
human capital - ✔✔skills and training that workers posses
slope - ✔✔rise over run. change in y over change of x.
Percentage change forumla - ✔✔((value in first period - value in second period)/value in the
first period) x 100
((V1-V2)/V1) x 100
-when calculating units don't matter
total revenue - ✔✔base x height, B x H (price times quantity demanded)
using a demand curve.
increasing marginal opportunity costs - ✔✔The more resources already devoted to an
economic activity, the smaller the payoff will be from devoting more resources to that activity
market - ✔✔group of buyer and sellers of a good or service and the institution by which they
come together to trade
Questions with Answers
At its core, Economics is about.. - ✔✔individuals (consumers, firms) and governments making
choices given scarce resources
Trade-Offs - ✔✔involve opportunity cost, the value of the best alternative given up
Productive efficiency: - ✔✔Productive efficiency: A situation in which a good or service is
produced at the lowest possible cost
a production possibilities frontier (PPF) - ✔✔A production possibilities frontier (PPF) is a curve
showing the maximum attainable combinations of two products that may be produced with
available resources (e.g. workers, materials, machinery...) and technology.
centrally planned economy - ✔✔an economy in which the government decides how economic
resources will be allocated
market economy - ✔✔the decisions of housholds, firms, and individuals interacting in the
market allocates resources.
mixed economy - ✔✔an economy in which most economic decisions are from the interaction of
buyers and sellers in a market but in which the government plays a significant roll in the
allocation of resources.
microeconomics - ✔✔study of how households and firms make choices in the market, how they
interact. and how the government attempts to influence their interactions
, macroeconomics - ✔✔the study of an economy as a whole, inflation, unemployment and
economic growth.
profit - ✔✔revenue-costs
factors of production/economic resources/input - ✔✔labor, capital, natural resources,
entrepreneurs.
human capital - ✔✔skills and training that workers posses
slope - ✔✔rise over run. change in y over change of x.
Percentage change forumla - ✔✔((value in first period - value in second period)/value in the
first period) x 100
((V1-V2)/V1) x 100
-when calculating units don't matter
total revenue - ✔✔base x height, B x H (price times quantity demanded)
using a demand curve.
increasing marginal opportunity costs - ✔✔The more resources already devoted to an
economic activity, the smaller the payoff will be from devoting more resources to that activity
market - ✔✔group of buyer and sellers of a good or service and the institution by which they
come together to trade
