ECON-B 251 EXAM 1 CERTIFICATION
EVALUATION SCRIPT 2026 FULL SOLUTION
◉ Rate of change. Answer: Price/Quantity (P/Q)
- For a linear relationship, this is consistent across the equation
-For a nonlinear equation, this can be extracted as the tangent of a
specific point on the equation.
◉ Economics. Answer: The study of allocation of scarce resources.
◉ Microeconomics. Answer: Study of decision making by
individuals, households, or firms (pollution, crime, health care,
education).
◉ Macroeconomics. Answer: Study of the behavior of the economy
as a whole (inflation, taxes, unemployment).
◉ Rationality assumption. Answer: Assumption that people do not
intentionally make decisions that would leave them worse off.
◉ Bounded rationality. Answer: People do not always behave
rationally, due to: asymmetric information, lack of
time/ability/resources, bias, emotion, uncertainty, risk.
,◉ Prospect theory. Answer: People choose to take on risk when
evaluating potential losses and avoid risks when evaluating potential
gains.
◉ Loss aversion. Answer: The strong tendency to regard losses as
considerably more important than gains.
◉ Self-interest. Answer: Economists assume that people make
decisions in this way, intended to make the decision-maker better off
without considering others.
◉ Social interest. Answer: Decisions made in this way are
considered to be the best decision for society as a whole, taking into
account efficiency and equity.
◉ Incentivizing social interest. Answer: Governments may place
punishments or subsidies in order for people to act in social interest
as opposed to self-interest.
◉ Economic models. Answer: Simplifications of reality that help the
understanding of patterns and similarities across different
situations, useful abstractions of reality.
, ◉ Marginal effect. Answer: The effect on the dependent variable that
results from changing an independent variable by a small amount.
◉ Ceteris paribus. Answer: Keeping all other factors constant in a
model.
◉ Scarcity principle. Answer: Not enough resources are available to
satisfy all wants, so all actions have tradeoffs.
◉ Direct costs. Answer: Costs that are specifically associated with an
action.
◉ Opportunity cost. Answer: Cost of ruling out alternative actions-->
the value of the next best foregone alternative action.
◉ Opportunity cost equation. Answer: Opportunity cost = Benefits -
Costs.
◉ Positive economics. Answer: Descriptive statements or scientific
predictions, tested by checking against facts.
◉ Normative economics. Answer: Value judgements about what
individuals should choose, cannot be tested.
EVALUATION SCRIPT 2026 FULL SOLUTION
◉ Rate of change. Answer: Price/Quantity (P/Q)
- For a linear relationship, this is consistent across the equation
-For a nonlinear equation, this can be extracted as the tangent of a
specific point on the equation.
◉ Economics. Answer: The study of allocation of scarce resources.
◉ Microeconomics. Answer: Study of decision making by
individuals, households, or firms (pollution, crime, health care,
education).
◉ Macroeconomics. Answer: Study of the behavior of the economy
as a whole (inflation, taxes, unemployment).
◉ Rationality assumption. Answer: Assumption that people do not
intentionally make decisions that would leave them worse off.
◉ Bounded rationality. Answer: People do not always behave
rationally, due to: asymmetric information, lack of
time/ability/resources, bias, emotion, uncertainty, risk.
,◉ Prospect theory. Answer: People choose to take on risk when
evaluating potential losses and avoid risks when evaluating potential
gains.
◉ Loss aversion. Answer: The strong tendency to regard losses as
considerably more important than gains.
◉ Self-interest. Answer: Economists assume that people make
decisions in this way, intended to make the decision-maker better off
without considering others.
◉ Social interest. Answer: Decisions made in this way are
considered to be the best decision for society as a whole, taking into
account efficiency and equity.
◉ Incentivizing social interest. Answer: Governments may place
punishments or subsidies in order for people to act in social interest
as opposed to self-interest.
◉ Economic models. Answer: Simplifications of reality that help the
understanding of patterns and similarities across different
situations, useful abstractions of reality.
, ◉ Marginal effect. Answer: The effect on the dependent variable that
results from changing an independent variable by a small amount.
◉ Ceteris paribus. Answer: Keeping all other factors constant in a
model.
◉ Scarcity principle. Answer: Not enough resources are available to
satisfy all wants, so all actions have tradeoffs.
◉ Direct costs. Answer: Costs that are specifically associated with an
action.
◉ Opportunity cost. Answer: Cost of ruling out alternative actions-->
the value of the next best foregone alternative action.
◉ Opportunity cost equation. Answer: Opportunity cost = Benefits -
Costs.
◉ Positive economics. Answer: Descriptive statements or scientific
predictions, tested by checking against facts.
◉ Normative economics. Answer: Value judgements about what
individuals should choose, cannot be tested.
