ECON 101 Exam 1 (UMICH -
Wolfers) Questions and Answers
100% Pass
what affects your decision via the interdependence principle? (4) - CORRECT
ANSWER-your other decisions, (you have limited resources, other constraints)
decisions made by others within the market, decisions made by others in other
markets, expectations over time
What drives all economic forces? - CORRECT ANSWER-individual decisions
Name the four core principles of economics - CORRECT ANSWER-cost benefit,
opportunity cost, marginal, interdependence
Buy when costs (<,>,=) benefits - CORRECT ANSWER-<
How would you compare decisions that have nothing in common? - CORRECT
ANSWER-willingness to pay
economic surplus - CORRECT ANSWER-benefits - costs from a decision,
measures how much the decision improved your well-being
,framing effect - CORRECT ANSWER-differences in the way decisions are
described can lead people to make different (illogical) decisions
opportunity cost - CORRECT ANSWER-the true cost of something is the next
best alternative you must give up to get it (included in costs when calculating costs
vs benefits)
scarcity - CORRECT ANSWER-resources are limited, so any use of them comes
at an opportunity cost
steps to evaluating opportunity cost - CORRECT ANSWER-what happens if you
pick your choice? what happens if you pick the next best alternative?
sunk costs - CORRECT ANSWER-time/effort/etc. put into the project which
cannot be reversed (IGNORED in costs vs benefits and exists regardless of which
choice is made)
possibility production frontier - CORRECT ANSWER-shows different outputs
attainable with a set of scarce resources, describes the most you can produce given
the circumstances (more of A means less of B, etc.)
how to shift out the PPF (shift right) - CORRECT ANSWER-new production
techniques
marginal principle - CORRECT ANSWER-decisions about quantities are best
made incrementally (break down into smaller questions to ask "one more?" instead
of "how many?")
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED
, you should apply the marginal principle and ask "one more?" until: - CORRECT
ANSWER-marginal benefits >= marginal costs (when your economic surplus is
maximized)
interdependence principle - CORRECT ANSWER-the best choice depends on
other choices and outside factors
someone else's shoes technique - CORRECT ANSWER-think about others'
objectives and constraints to predict their decisions
total marketwide demand - CORRECT ANSWER-sum of individual demand
choices made by buyers
individual demand curve - CORRECT ANSWER-graph plotting the quantity of an
item someone intends to buy at various prices (P vs Qd) (summarizes BUYING
PLANS and how they vary with price)
Price is graphed on the ___ axis, and Quantity is on the ___ axis - CORRECT
ANSWER-y, x
the demand curve is always ___ - sloping - CORRECT ANSWER-downward (as P
increases, Q decreases)
Demand and supply curves are graphed holding ___ ___ ___. This is an example
of the ___ principle because the curve is applicable only under the conditions
which it was created. - CORRECT ANSWER-other things constant, (ONLY price
changes along the curve) interdependence
Wolfers) Questions and Answers
100% Pass
what affects your decision via the interdependence principle? (4) - CORRECT
ANSWER-your other decisions, (you have limited resources, other constraints)
decisions made by others within the market, decisions made by others in other
markets, expectations over time
What drives all economic forces? - CORRECT ANSWER-individual decisions
Name the four core principles of economics - CORRECT ANSWER-cost benefit,
opportunity cost, marginal, interdependence
Buy when costs (<,>,=) benefits - CORRECT ANSWER-<
How would you compare decisions that have nothing in common? - CORRECT
ANSWER-willingness to pay
economic surplus - CORRECT ANSWER-benefits - costs from a decision,
measures how much the decision improved your well-being
,framing effect - CORRECT ANSWER-differences in the way decisions are
described can lead people to make different (illogical) decisions
opportunity cost - CORRECT ANSWER-the true cost of something is the next
best alternative you must give up to get it (included in costs when calculating costs
vs benefits)
scarcity - CORRECT ANSWER-resources are limited, so any use of them comes
at an opportunity cost
steps to evaluating opportunity cost - CORRECT ANSWER-what happens if you
pick your choice? what happens if you pick the next best alternative?
sunk costs - CORRECT ANSWER-time/effort/etc. put into the project which
cannot be reversed (IGNORED in costs vs benefits and exists regardless of which
choice is made)
possibility production frontier - CORRECT ANSWER-shows different outputs
attainable with a set of scarce resources, describes the most you can produce given
the circumstances (more of A means less of B, etc.)
how to shift out the PPF (shift right) - CORRECT ANSWER-new production
techniques
marginal principle - CORRECT ANSWER-decisions about quantities are best
made incrementally (break down into smaller questions to ask "one more?" instead
of "how many?")
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED
, you should apply the marginal principle and ask "one more?" until: - CORRECT
ANSWER-marginal benefits >= marginal costs (when your economic surplus is
maximized)
interdependence principle - CORRECT ANSWER-the best choice depends on
other choices and outside factors
someone else's shoes technique - CORRECT ANSWER-think about others'
objectives and constraints to predict their decisions
total marketwide demand - CORRECT ANSWER-sum of individual demand
choices made by buyers
individual demand curve - CORRECT ANSWER-graph plotting the quantity of an
item someone intends to buy at various prices (P vs Qd) (summarizes BUYING
PLANS and how they vary with price)
Price is graphed on the ___ axis, and Quantity is on the ___ axis - CORRECT
ANSWER-y, x
the demand curve is always ___ - sloping - CORRECT ANSWER-downward (as P
increases, Q decreases)
Demand and supply curves are graphed holding ___ ___ ___. This is an example
of the ___ principle because the curve is applicable only under the conditions
which it was created. - CORRECT ANSWER-other things constant, (ONLY price
changes along the curve) interdependence
