ECN 212: Final Exam Multiple Choice
Study Guide Questions with Rationales
2026-2027 Guide.
Millions of producers working across the world cooperate to ensure that many more millions of
consumers can have the goods and services they desire. These producers do not know each
other and are not coordinated by a central agency. Their actions are directed simply by:
A) their governments.
B) robotic technology.
C) computer technology.
D) self-Interest. - Answer D) self-interest.
After a hurricane knocks out power to thousands of households, the price of electric generators
increases threefold. According to economists:
A) this is a vivid example of market and class exploitation by capitalists.
B) this discourages the use of electric generators in low-value uses, making them more readily
available for high-value uses
C) the rising price will give an incentive for firms to ship fewer electric generators to the disaster
area
D) the increase in demand for electric generators should technically cause the price to fall after
a hurricane - Answer B) this discourages the use of electric generators in low-value uses,
making them more readily available for high-value uses
Circa 1200 BCE, a decreasing supply of tin due to wars and the breakdown of trade led to a
drastic increase in the price of bronze in the Middle East and Greece (tin being necessary for its
production). It is around this time that blacksmiths developed iron- and steel-making
techniques (as substitutes for bronze). What does the increasing price of bronze signal?
A) It tells people to buy more bronze because it is going to be more valuable in the future
B) It tells people that the wars in the Middle East and Greece are coming close to being resolved
because of bronze scarcity
C) It tells people that there is a price bubble forming around bronze and that people are
overvaluing the price of bronze
D) It tells people that bronze is getting harder to find and its higher price will signal consumers
to conserve it more or seek substitutes - Answer D) It tells people that bronze is getting harder
to find and its higher price will signal consumers to conserve it more or seek substitutes
Suppose that changing climate conditions results in a shortage of wood. Which of the following
is the most likely consequence of this shortage?
A) Paper, which is made from wood, would be rendered obsolete by continued technological
advancement.
,B) Houses would be torn down, and the wood used to make them recycled towards more
valuable uses. New houses would be built with other materials.
C) No one has any idea, but the market system will sort everything out for us, and make sure we
continue to use wood in the most valuable ways possible.
D) Local governments would restrict the use of wood for burning in fireplaces, as this is not a
necessary use. - Answer C) No one has any idea, but the market system will sort everything
out for us, and make sure we continue to use wood in the most valuable ways possible
A prediction market is a:
A) perfectly functioning futures marker, so that futures output can be interpreted as
probabilities and used to make predictions
B) speculative market carefully designed so that output can be interpreted as probabilities and
used to make predictions
C) perfectly functioning futures market, so that futures prices can be interpreted as probabilities
and used to make predictions
D) speculative market carefully designed so that prices can be interpreted as probabilities and
used to make predictions - Answer D) speculative market carefully designed so that prices can
be interpreted as probabilities and used to make predictions
Increasing prices act as a signal to:
A) consumers that the good is overvalued.
B) speculators that the opportunity cost of the good is falling
C) politicians that price gouging is occurring
D) suppliers to increase the quantity supplied in those markets - Answer D) suppliers to
increase the quantity supplied in those markets
Large-scale central planning has been abandoned throughout the world (except for North Korea
and Cuba) because of ______ and _____ problems.
A) incentives; asymmetry
B) communication; complexity
C) information; transactions cost
D) information; incentive - Answer D) Information; incentive
In a competitive market, what does it mean when a company goes out of business?
A) Capitalism capriciously causes some businesses to fail.
B) Resources are freed up to go to some other higher-valued use.
C) It is not a very useful signal.
D) The economy is not working very well. - Answer B) Resources are freed up to go to some
other higher-valued use.
, Fill in the blanks: When the government subsidizes an activity, resources such as labor,
machines, and bank lending will tend to gravitate __________ the activity that is subsidized and
will tend to gravitate ___________ activity that is not subsidized.
A) away from; toward
B) away from; away from
C) toward; away from
D) toward; toward - Answer C) toward; away from
What is deadweight loss?
A) negative value of trades which are not mutually beneficial to both buyers and sellers, but do
occur because of a subsidy.
B) The higher cost of a subsidy compared to a tax.
C) The value of subsidies paid to those who would buy the good anyway.
D) The value of trades which are not mutually beneficial to both buyers and sellers, but do not
occur because of a subsidy. - Answer A) The negative value of trades which are not mutually
beneficial to both buyers and sellers, but do occur because of a subsidy.
If the government imposes a commodity tax on the sellers of a good, which of the following
describes the change to the market?
A) Demand shifts up by the amount of the tax.
B) Demand shifts down by the amount of the tax.
C) Supply shifts down by the amount of the tax.
D) Supply shifts up by the amount of the tax. - Answer D) Supply shifts up by the amount of
the tax
If the government imposes a commodity tax on the buyers of a good, which of the following
describes the change to the market?
A) Supply shifts down by the amount of the tax.
B) Demand shifts up by the amount of the tax.
C) Demand shifts down by the amount of the tax.
D) Supply shifts up by the amount of the tax. - Answer C) Demand shifts down by the amount
of the tax
In an effort to reduce obesity, many governments have imposed or considered placing a tax on
sugar-sweetened beverages like soda. If the government is hoping that a small tax can actually
discourage soda consumption, it should hope for:
A) Inelastic supply and inelastic demand
Study Guide Questions with Rationales
2026-2027 Guide.
Millions of producers working across the world cooperate to ensure that many more millions of
consumers can have the goods and services they desire. These producers do not know each
other and are not coordinated by a central agency. Their actions are directed simply by:
A) their governments.
B) robotic technology.
C) computer technology.
D) self-Interest. - Answer D) self-interest.
After a hurricane knocks out power to thousands of households, the price of electric generators
increases threefold. According to economists:
A) this is a vivid example of market and class exploitation by capitalists.
B) this discourages the use of electric generators in low-value uses, making them more readily
available for high-value uses
C) the rising price will give an incentive for firms to ship fewer electric generators to the disaster
area
D) the increase in demand for electric generators should technically cause the price to fall after
a hurricane - Answer B) this discourages the use of electric generators in low-value uses,
making them more readily available for high-value uses
Circa 1200 BCE, a decreasing supply of tin due to wars and the breakdown of trade led to a
drastic increase in the price of bronze in the Middle East and Greece (tin being necessary for its
production). It is around this time that blacksmiths developed iron- and steel-making
techniques (as substitutes for bronze). What does the increasing price of bronze signal?
A) It tells people to buy more bronze because it is going to be more valuable in the future
B) It tells people that the wars in the Middle East and Greece are coming close to being resolved
because of bronze scarcity
C) It tells people that there is a price bubble forming around bronze and that people are
overvaluing the price of bronze
D) It tells people that bronze is getting harder to find and its higher price will signal consumers
to conserve it more or seek substitutes - Answer D) It tells people that bronze is getting harder
to find and its higher price will signal consumers to conserve it more or seek substitutes
Suppose that changing climate conditions results in a shortage of wood. Which of the following
is the most likely consequence of this shortage?
A) Paper, which is made from wood, would be rendered obsolete by continued technological
advancement.
,B) Houses would be torn down, and the wood used to make them recycled towards more
valuable uses. New houses would be built with other materials.
C) No one has any idea, but the market system will sort everything out for us, and make sure we
continue to use wood in the most valuable ways possible.
D) Local governments would restrict the use of wood for burning in fireplaces, as this is not a
necessary use. - Answer C) No one has any idea, but the market system will sort everything
out for us, and make sure we continue to use wood in the most valuable ways possible
A prediction market is a:
A) perfectly functioning futures marker, so that futures output can be interpreted as
probabilities and used to make predictions
B) speculative market carefully designed so that output can be interpreted as probabilities and
used to make predictions
C) perfectly functioning futures market, so that futures prices can be interpreted as probabilities
and used to make predictions
D) speculative market carefully designed so that prices can be interpreted as probabilities and
used to make predictions - Answer D) speculative market carefully designed so that prices can
be interpreted as probabilities and used to make predictions
Increasing prices act as a signal to:
A) consumers that the good is overvalued.
B) speculators that the opportunity cost of the good is falling
C) politicians that price gouging is occurring
D) suppliers to increase the quantity supplied in those markets - Answer D) suppliers to
increase the quantity supplied in those markets
Large-scale central planning has been abandoned throughout the world (except for North Korea
and Cuba) because of ______ and _____ problems.
A) incentives; asymmetry
B) communication; complexity
C) information; transactions cost
D) information; incentive - Answer D) Information; incentive
In a competitive market, what does it mean when a company goes out of business?
A) Capitalism capriciously causes some businesses to fail.
B) Resources are freed up to go to some other higher-valued use.
C) It is not a very useful signal.
D) The economy is not working very well. - Answer B) Resources are freed up to go to some
other higher-valued use.
, Fill in the blanks: When the government subsidizes an activity, resources such as labor,
machines, and bank lending will tend to gravitate __________ the activity that is subsidized and
will tend to gravitate ___________ activity that is not subsidized.
A) away from; toward
B) away from; away from
C) toward; away from
D) toward; toward - Answer C) toward; away from
What is deadweight loss?
A) negative value of trades which are not mutually beneficial to both buyers and sellers, but do
occur because of a subsidy.
B) The higher cost of a subsidy compared to a tax.
C) The value of subsidies paid to those who would buy the good anyway.
D) The value of trades which are not mutually beneficial to both buyers and sellers, but do not
occur because of a subsidy. - Answer A) The negative value of trades which are not mutually
beneficial to both buyers and sellers, but do occur because of a subsidy.
If the government imposes a commodity tax on the sellers of a good, which of the following
describes the change to the market?
A) Demand shifts up by the amount of the tax.
B) Demand shifts down by the amount of the tax.
C) Supply shifts down by the amount of the tax.
D) Supply shifts up by the amount of the tax. - Answer D) Supply shifts up by the amount of
the tax
If the government imposes a commodity tax on the buyers of a good, which of the following
describes the change to the market?
A) Supply shifts down by the amount of the tax.
B) Demand shifts up by the amount of the tax.
C) Demand shifts down by the amount of the tax.
D) Supply shifts up by the amount of the tax. - Answer C) Demand shifts down by the amount
of the tax
In an effort to reduce obesity, many governments have imposed or considered placing a tax on
sugar-sweetened beverages like soda. If the government is hoping that a small tax can actually
discourage soda consumption, it should hope for:
A) Inelastic supply and inelastic demand
