UNT ECON 1100 Final Review
Microeconomics - correct answer-The study of decisions made by individuals, households,
and firms
Macroeconomics - correct answer-The study of economics aggregates, such as the national
unemployment rate, the rate of inflation, and the economy's growth rate, as well as
macroeconomic policies designed to promote full employment, price stability, and a healthy
rate of economic growth
`
Positive economics - correct answer-The ability to make accurate statements about
economic relationships, which can be tested against facts
Normative economics - correct answer-The ability to make informed statements of what
should be; requires value judgements
Fallacy of composition - correct answer-An incorrect conclusion that occurs when it is
assumed that what is true for the parts is also true for the whole
Fallacy of division - correct answer-An incorrect conclusion that occurs when it is assumed
that what is true for the whole is also true for each of the parts
Ceteris Paribus assumption - correct answer-an assumption used to isolate the relationship
between two variables by holding other influences on the relationship constant
Circular flow model - correct answer-A model that was developed in the mid-eighteenth
century in France; one of the first models used to help explain economic relationships. this
model shows the interaction of participants in a market economy. page 6 book
Production possibilities frontier (PPF) - correct answer-A graph illustrating the combinations
of two types of output that can be produced by a society using the available resources and
technology
Opportunity cost - correct answer-the value of the best alternative that must be given up
when a choice is made
Efficiency - correct answer-the outcome of voluntary exchange in free markets, assuming no
market failures, and consistent with the best use of scarce resources
Inefficiency - correct answer-producing less then they can, which keeps society from
producing at its potential
economic growth - correct answer-a long term process that permits increased production of
goods and services and improved material standards of living
, Comparative advantage - correct answer-the ability to produce a particular type of output at
a lower opportunity cost than another country
Trade deficit - correct answer-occurs when the value of imports exceeds the value of exports
Trade surplus - correct answer-occurs when the value of exports exceeds the value of
imports
Demand - correct answer-The decision to buy, hire, or borrow; represented by a demand
function that shows the relationship between price (or wage rate or interest rate) and
quantity demanded, ceteris paribus
Supply - correct answer-The decision to tell, accept employment, or lend. represented by a
supply function that shows the relationship between price (or wage rate or interest rate) and
quality supplied, ceteris paribus
Law of demand - correct answer-The observation that a greater quantity will be demanded at
lower relative prices than at higher relative prices, ceteris paribus
Law of supply - correct answer-The observation that a greater quantity will be supplied at
higher relative prices than at lower relative prices, ceteris paribus
Market equilibrium - correct answer-an outcome in which the market is cleared because
quantity demanded equals quantity supplied and there is no shortage and no surplus
Market shortage - correct answer-occurs when the quantity demanded exceeds the quantity
supplied; the size of the shortage is measured by subtracting the quantity supplied from the
quantity demanded
Market surplus - correct answer-occurs when the quantity supplied exceeds the quantity
demanded; the size of the surplus is measured by subtracting the quantity demanded from
the quantity supplied
factors that change demand - correct answer-change in price
fall in demand
tastes and preferences
income
the price of related goods
the number of buyers
expectations (of buyers)
factors that change supply - correct answer-As price increases firms have an incentive to
supply more because they get extra revenue (income) from selling the goods.
If price changes, there is a movement along the supply curve, e.g. a higher price causes a
higher amount to be supplied.
costs of production
Microeconomics - correct answer-The study of decisions made by individuals, households,
and firms
Macroeconomics - correct answer-The study of economics aggregates, such as the national
unemployment rate, the rate of inflation, and the economy's growth rate, as well as
macroeconomic policies designed to promote full employment, price stability, and a healthy
rate of economic growth
`
Positive economics - correct answer-The ability to make accurate statements about
economic relationships, which can be tested against facts
Normative economics - correct answer-The ability to make informed statements of what
should be; requires value judgements
Fallacy of composition - correct answer-An incorrect conclusion that occurs when it is
assumed that what is true for the parts is also true for the whole
Fallacy of division - correct answer-An incorrect conclusion that occurs when it is assumed
that what is true for the whole is also true for each of the parts
Ceteris Paribus assumption - correct answer-an assumption used to isolate the relationship
between two variables by holding other influences on the relationship constant
Circular flow model - correct answer-A model that was developed in the mid-eighteenth
century in France; one of the first models used to help explain economic relationships. this
model shows the interaction of participants in a market economy. page 6 book
Production possibilities frontier (PPF) - correct answer-A graph illustrating the combinations
of two types of output that can be produced by a society using the available resources and
technology
Opportunity cost - correct answer-the value of the best alternative that must be given up
when a choice is made
Efficiency - correct answer-the outcome of voluntary exchange in free markets, assuming no
market failures, and consistent with the best use of scarce resources
Inefficiency - correct answer-producing less then they can, which keeps society from
producing at its potential
economic growth - correct answer-a long term process that permits increased production of
goods and services and improved material standards of living
, Comparative advantage - correct answer-the ability to produce a particular type of output at
a lower opportunity cost than another country
Trade deficit - correct answer-occurs when the value of imports exceeds the value of exports
Trade surplus - correct answer-occurs when the value of exports exceeds the value of
imports
Demand - correct answer-The decision to buy, hire, or borrow; represented by a demand
function that shows the relationship between price (or wage rate or interest rate) and
quantity demanded, ceteris paribus
Supply - correct answer-The decision to tell, accept employment, or lend. represented by a
supply function that shows the relationship between price (or wage rate or interest rate) and
quality supplied, ceteris paribus
Law of demand - correct answer-The observation that a greater quantity will be demanded at
lower relative prices than at higher relative prices, ceteris paribus
Law of supply - correct answer-The observation that a greater quantity will be supplied at
higher relative prices than at lower relative prices, ceteris paribus
Market equilibrium - correct answer-an outcome in which the market is cleared because
quantity demanded equals quantity supplied and there is no shortage and no surplus
Market shortage - correct answer-occurs when the quantity demanded exceeds the quantity
supplied; the size of the shortage is measured by subtracting the quantity supplied from the
quantity demanded
Market surplus - correct answer-occurs when the quantity supplied exceeds the quantity
demanded; the size of the surplus is measured by subtracting the quantity demanded from
the quantity supplied
factors that change demand - correct answer-change in price
fall in demand
tastes and preferences
income
the price of related goods
the number of buyers
expectations (of buyers)
factors that change supply - correct answer-As price increases firms have an incentive to
supply more because they get extra revenue (income) from selling the goods.
If price changes, there is a movement along the supply curve, e.g. a higher price causes a
higher amount to be supplied.
costs of production
