ECON 110 CORRECT EXAMS ANSWERS AND
QUESTIONS SET A+
✔✔conducting experiments is often impractical - ✔✔obstacle in economist as a scientist
✔✔Natural experiment - ✔✔A real-world event that allows economists to study cause
and effect without creating the event
✔✔circular-flow diagram - ✔✔visual model of the economy that shows how dollars flow
through markets among households and firms
✔✔firms and households - ✔✔two types of decision makers
✔✔firms - ✔✔who produces goods and services using inputs
✔✔factors of production - ✔✔what are inputs
✔✔households - ✔✔who consumes the goods and services that the firms produces
✔✔buyers - ✔✔markets for goods and services, households are
✔✔sellers - ✔✔markets for goods and services, firms are
✔✔sellers - ✔✔markets for the factors of production, households are
✔✔buyers - ✔✔markets for the factors of production, firms are
✔✔household and firms - ✔✔two main decision makers
✔✔market for goods and services; market for factors of production - ✔✔two markets
✔✔how buyers and sellers behave and how they interact with one another - ✔✔theory
of supply and demand
, ✔✔market - ✔✔group of buyers and sellers of a particular good or service
✔✔buyers - ✔✔who determines the demand for the product
✔✔sellers - ✔✔who determines the supply of the product
✔✔competitive market - ✔✔there are so many buyers and so many sellers that each
has a negligible impact on the market price
✔✔1. The goods offered for sale are all exactly the same
2. The buyers and sellers are so numerous - ✔✔two characteristics of the highest form
of competition
✔✔monopoly - ✔✔one seller that sets the price
✔✔perfect competition and monopoly - ✔✔other markets fall between the extremes of
✔✔law of demand - ✔✔Other things being equal, when the price of a good rises, the
quantity demanded of the good falls, and when the price falls, the quantity demanded
rises
✔✔ceteris paribus - ✔✔all other things being equal" or "holding other factors constant
✔✔normal good - ✔✔if the demand for a good falls when income falls, what is it called
✔✔inferior good - ✔✔when the demand for a good rises when income falls,
✔✔substitutes - ✔✔When a fall in the price of one good reduces the demand for
another good
✔✔complements - ✔✔When a fall in the price of one good raises the demand for
another good
✔✔law of supply - ✔✔Other things being equal, when the price of a good rises, the
quantity supplied of the good also rises, and when the price falls, the quantity supplied
falls as well
✔✔market equilibrium - ✔✔one point at which the supply and demand curves intersect
✔✔market-clearing price - ✔✔The equilibrium price is sometimes called the
______________ because everyone in the market has been satisfied
QUESTIONS SET A+
✔✔conducting experiments is often impractical - ✔✔obstacle in economist as a scientist
✔✔Natural experiment - ✔✔A real-world event that allows economists to study cause
and effect without creating the event
✔✔circular-flow diagram - ✔✔visual model of the economy that shows how dollars flow
through markets among households and firms
✔✔firms and households - ✔✔two types of decision makers
✔✔firms - ✔✔who produces goods and services using inputs
✔✔factors of production - ✔✔what are inputs
✔✔households - ✔✔who consumes the goods and services that the firms produces
✔✔buyers - ✔✔markets for goods and services, households are
✔✔sellers - ✔✔markets for goods and services, firms are
✔✔sellers - ✔✔markets for the factors of production, households are
✔✔buyers - ✔✔markets for the factors of production, firms are
✔✔household and firms - ✔✔two main decision makers
✔✔market for goods and services; market for factors of production - ✔✔two markets
✔✔how buyers and sellers behave and how they interact with one another - ✔✔theory
of supply and demand
, ✔✔market - ✔✔group of buyers and sellers of a particular good or service
✔✔buyers - ✔✔who determines the demand for the product
✔✔sellers - ✔✔who determines the supply of the product
✔✔competitive market - ✔✔there are so many buyers and so many sellers that each
has a negligible impact on the market price
✔✔1. The goods offered for sale are all exactly the same
2. The buyers and sellers are so numerous - ✔✔two characteristics of the highest form
of competition
✔✔monopoly - ✔✔one seller that sets the price
✔✔perfect competition and monopoly - ✔✔other markets fall between the extremes of
✔✔law of demand - ✔✔Other things being equal, when the price of a good rises, the
quantity demanded of the good falls, and when the price falls, the quantity demanded
rises
✔✔ceteris paribus - ✔✔all other things being equal" or "holding other factors constant
✔✔normal good - ✔✔if the demand for a good falls when income falls, what is it called
✔✔inferior good - ✔✔when the demand for a good rises when income falls,
✔✔substitutes - ✔✔When a fall in the price of one good reduces the demand for
another good
✔✔complements - ✔✔When a fall in the price of one good raises the demand for
another good
✔✔law of supply - ✔✔Other things being equal, when the price of a good rises, the
quantity supplied of the good also rises, and when the price falls, the quantity supplied
falls as well
✔✔market equilibrium - ✔✔one point at which the supply and demand curves intersect
✔✔market-clearing price - ✔✔The equilibrium price is sometimes called the
______________ because everyone in the market has been satisfied
