ECON 110 CERTIFICATION EXAM
QUESTIONS AND VERIFIED
ANSWERS 2026
▶ The Dismal Science. Answer: How do economists answer questions?
It Depends.
"Give me a one-armed economist!" demanded President Harry S. Truman.
▶ Normative vs Positive statements. Answer: Normative- Opinion or
Preference.
Positive- Fact based.
▶ Microeconomics. Answer: Is the study of decisions that people and
businesses make regarding the allocation of resources and prices of goods
and services.
The small scale study of the economy.
▶ Macroeconomics. Answer: Is the field of economics that studies the
behavior of the economy as a whole and not just on specific companies,
but entire industries and economies.
It is the large scale study of the economy.
▶ Economic law 1. Answer: The Law of Self Interest-Given a choice,
people will always make a choice that is best for them.
▶ Economic law 2. Answer: "There is no such thing as a free lunch."=
In a world of wants and needs and limited resources there is scarcity.
Scarcity forces us to make choices and those choices have a cost...
▶ Economic law 3. Answer: The Law of Demand-
The less of something there is to go around the more people are willing to
pay for it.
The more there is of something to go around the less people will pay for it.
,-Picasso's paintings
▶ Economic law 4. Answer: Economic Law #4: The Law of Supply-
The more people are willing to pay; the more people are willing to make.
The less people are willing to pay; the less people are willing to make.
-Cellphones
-Shorts in the winter
▶ The Power of Incentives. Answer: Positive Incentives- Reward
-$100 for coming to class
Negative Incentive- Punishment
-Breaking kneecaps for not coming to class
Perverse Incentive- Unintended consequence. Ex. spreading covid
because the students have to show up
When incentives change, people's behavior changes in predictable ways.
▶ Externalities. Answer: An imposition of a good thing (positive externality)
or a bad thing (negative externality) on an uninvolved 3rd party.
-weather, animals on a wedding day
▶ What is the goal of economics?. Answer: To make people better-off
through the use of choices.
▶ 3 basic economic questions. Answer: What to Produce?
For Whom to Produce?
How to Produce?
▶ Economic Resources. Answer: Land
Labor
Capital
- Financial
-Technology
-Sometimes Entrepreneurship
▶ Tools of Economics. Answer: Factual Tools- Stats, history, and how
institutions operate.
Theoretical Tools- Economic concepts and ideas. How are choices made?
What are the implications for those choices and for quality of life? Are we
making things better or worse?
,▶ Scientific method. Answer: Observe an event.
Devise a hypothesis.
Test the hypothesis.
Accept, reject, or revise, the hypothesis.
▶ Scarcity. Answer: The need for the science of economics comes from
scarcity. We only have a limited number of resources to satisfy our
unlimited wants for goods and services. As a result, we need to economize
on the use of those resources to get the greatest benefit out of them. The
limited resources for production relative to demand for goods and services.
"As long as there is demand, there is scarcity"
Bottom Line...We can't have everything we want! Understanding this allows
one to understand economics better.
▶ So What is the Difference Between Something That is Scarce and
Something That is Rare?. Answer: Does not commonly exist. Something
that is rare is not always scarce but something that is scarce is also rare.
Point is, there has to be a demand for the rare item for it to be scarce.
▶ Human Capital. Answer: Stripped of everything, what you have
left...charisma, good looks, intelligence, etc.
▶ Want vs need. Answer: Want- Something we feel would satisfy our
needs but is not a necessity.
Need- Necessity.
▶ Rationing and allocation. Answer: Rationing Methods
central authority
random
draw/lottery
equality
1st come 1st serve
fixed favoritism
price
▶ Preference. Answer: One's first choice
▶ Alternatives. Answer: Different alternatives from which you can choose.
▶ Choice. Answer: Must be made as to which wants and needs to satisfy.
, Most situations involve making choices. People evaluate the costs and
benefits of different alternatives and choose the alternative that seems best
to them.
People's Choices Have Consequences That Lie in the Future
The important costs and benefits in economic decision-making are those
that will appear in the future. The study of economics stresses the
importance of making decisions about the future because we can influence
only the future; we cannot influence things that happened in the past.
▶ Utility. Answer: A measure of the relative satisfaction from or desirability
of consumption of various goods and services.
How one can measure a certain level of happiness...How do we measure
happiness?...How much others have comparatively to us.
▶ Law of Diminishing Utility. Answer: Over time the usefulness or
satisfaction gained from a product decreases.
▶ Marginal. Answer: How much is too much? How much is not enough?
The fork in the road- Which way to go now?
You can make incremental decisions along the way, it does not have to be
all or nothing.
A measurable point.
▶ Law of Diminishing returns. Answer: At a point, the addition of any extra
resources does not help but may actually hinder one's utility.
A breaking point where no more can be produced while adding additional
units of resources.
▶ Trade off. Answer: Choices involve giving up something to get
something.
All choices have consequences, positive and/or negative.
▶ Opportunity cost. Answer: A resource can only be allocated to one thing
at a time. The opportunity cost of deciding to do one thing is the next best
alternative use of the resource. The next best thing on the list.
▶ Costs. Answer: To be obtained at a certain expenditure.
All choices have costs.
QUESTIONS AND VERIFIED
ANSWERS 2026
▶ The Dismal Science. Answer: How do economists answer questions?
It Depends.
"Give me a one-armed economist!" demanded President Harry S. Truman.
▶ Normative vs Positive statements. Answer: Normative- Opinion or
Preference.
Positive- Fact based.
▶ Microeconomics. Answer: Is the study of decisions that people and
businesses make regarding the allocation of resources and prices of goods
and services.
The small scale study of the economy.
▶ Macroeconomics. Answer: Is the field of economics that studies the
behavior of the economy as a whole and not just on specific companies,
but entire industries and economies.
It is the large scale study of the economy.
▶ Economic law 1. Answer: The Law of Self Interest-Given a choice,
people will always make a choice that is best for them.
▶ Economic law 2. Answer: "There is no such thing as a free lunch."=
In a world of wants and needs and limited resources there is scarcity.
Scarcity forces us to make choices and those choices have a cost...
▶ Economic law 3. Answer: The Law of Demand-
The less of something there is to go around the more people are willing to
pay for it.
The more there is of something to go around the less people will pay for it.
,-Picasso's paintings
▶ Economic law 4. Answer: Economic Law #4: The Law of Supply-
The more people are willing to pay; the more people are willing to make.
The less people are willing to pay; the less people are willing to make.
-Cellphones
-Shorts in the winter
▶ The Power of Incentives. Answer: Positive Incentives- Reward
-$100 for coming to class
Negative Incentive- Punishment
-Breaking kneecaps for not coming to class
Perverse Incentive- Unintended consequence. Ex. spreading covid
because the students have to show up
When incentives change, people's behavior changes in predictable ways.
▶ Externalities. Answer: An imposition of a good thing (positive externality)
or a bad thing (negative externality) on an uninvolved 3rd party.
-weather, animals on a wedding day
▶ What is the goal of economics?. Answer: To make people better-off
through the use of choices.
▶ 3 basic economic questions. Answer: What to Produce?
For Whom to Produce?
How to Produce?
▶ Economic Resources. Answer: Land
Labor
Capital
- Financial
-Technology
-Sometimes Entrepreneurship
▶ Tools of Economics. Answer: Factual Tools- Stats, history, and how
institutions operate.
Theoretical Tools- Economic concepts and ideas. How are choices made?
What are the implications for those choices and for quality of life? Are we
making things better or worse?
,▶ Scientific method. Answer: Observe an event.
Devise a hypothesis.
Test the hypothesis.
Accept, reject, or revise, the hypothesis.
▶ Scarcity. Answer: The need for the science of economics comes from
scarcity. We only have a limited number of resources to satisfy our
unlimited wants for goods and services. As a result, we need to economize
on the use of those resources to get the greatest benefit out of them. The
limited resources for production relative to demand for goods and services.
"As long as there is demand, there is scarcity"
Bottom Line...We can't have everything we want! Understanding this allows
one to understand economics better.
▶ So What is the Difference Between Something That is Scarce and
Something That is Rare?. Answer: Does not commonly exist. Something
that is rare is not always scarce but something that is scarce is also rare.
Point is, there has to be a demand for the rare item for it to be scarce.
▶ Human Capital. Answer: Stripped of everything, what you have
left...charisma, good looks, intelligence, etc.
▶ Want vs need. Answer: Want- Something we feel would satisfy our
needs but is not a necessity.
Need- Necessity.
▶ Rationing and allocation. Answer: Rationing Methods
central authority
random
draw/lottery
equality
1st come 1st serve
fixed favoritism
price
▶ Preference. Answer: One's first choice
▶ Alternatives. Answer: Different alternatives from which you can choose.
▶ Choice. Answer: Must be made as to which wants and needs to satisfy.
, Most situations involve making choices. People evaluate the costs and
benefits of different alternatives and choose the alternative that seems best
to them.
People's Choices Have Consequences That Lie in the Future
The important costs and benefits in economic decision-making are those
that will appear in the future. The study of economics stresses the
importance of making decisions about the future because we can influence
only the future; we cannot influence things that happened in the past.
▶ Utility. Answer: A measure of the relative satisfaction from or desirability
of consumption of various goods and services.
How one can measure a certain level of happiness...How do we measure
happiness?...How much others have comparatively to us.
▶ Law of Diminishing Utility. Answer: Over time the usefulness or
satisfaction gained from a product decreases.
▶ Marginal. Answer: How much is too much? How much is not enough?
The fork in the road- Which way to go now?
You can make incremental decisions along the way, it does not have to be
all or nothing.
A measurable point.
▶ Law of Diminishing returns. Answer: At a point, the addition of any extra
resources does not help but may actually hinder one's utility.
A breaking point where no more can be produced while adding additional
units of resources.
▶ Trade off. Answer: Choices involve giving up something to get
something.
All choices have consequences, positive and/or negative.
▶ Opportunity cost. Answer: A resource can only be allocated to one thing
at a time. The opportunity cost of deciding to do one thing is the next best
alternative use of the resource. The next best thing on the list.
▶ Costs. Answer: To be obtained at a certain expenditure.
All choices have costs.
