Econ Final Exam Questions& Answers graded A+ with correct answers 2024

Why are the issues of scarcity and choice the basis of economics? - answer-There will never be enough of everything to satisfy everyone completely. There has to be a limit What is the difference between scarcity and shortage - answer-Scarcity-principal that limited amounts of goods and services are available to meet unlimited wants, always exists shortage-lack of something desired, temporary or long-term why does every decision a person makes involves trades offs and opurtunity costs - answer-every decision involves a trade off because everyone's reasons are limited. There is always alternatives we give up when we choose one thing for another What are three key economic questions every society must answer - answer-1. what goods/services should be produced 2. how should they be produced 3. who consumes these goods/services What are advantages of a free market economy - answer-producers have full control, encourage economic growth, motivated to earn money Explain the concept of the invisible hand in relation to economics - answer-term economists use to describe self regulating nature of market place, where demand of market determines how much producers produce what are the benefits of the american free enterprise system - answer-profit motive,open oppurtunity, private property rights, free contract, voluntary exchange, competition, GDP, business cycle, macro/microeconomics How does the government help promote stability and growth in the american free enterprise system - answer-with open opportunity: allows economic mobility up/down legal equality: maximises countrys use of human capital freedom to buy/sell: encourages competition making merchandise better How does the substition effect and the income effect influence decisions of consumers - answer-if a person's income decreases then they might buy substitute products because it is cheaper. If their income increases back up they then would go back to buying name brands what factors can cause a shift in demand curve - answer-income, preferance, expectations, substitutes, compliments,advertising Why is it that some products have very elastic demand and others dont - answer-Goods tend to be more elastic if it has more substitutes because it is easier for consumers to switch to another good. Elastic products are sensitive to price changes. Inelastic goods are more of necessaties and not sensitive What costs must a producer consider in determining the price they will charge for an item they produce? - answer-profit, market demand, oppurtunity cost, average cost What factors can cause a shift in supply curve - answer-change in cost How do businesses determine profit - answer-total revenue-total cost Why is finding the equilibrium price so important in the market place? - answer-because when its at equilibrium its stable and both buy/seller benefit Why can setting a price floor or price ceiling for a product cause problems with the equilibrium price? - answer-people are able to buy moe then what company is willing to sell at that price. It is bad for company b/c loss of profit. price floor is bad because they will not be able to higher workers cuz they cant give enough. Equilibrium is messed up What impact do shortages and surpluses have on prices - answer-if theres a shortage, when people want to buy more then you sell, the company will raise cost to earn profit but less people will want to buy. Surplus is when more product is made more people will buy because price is lower What are advtanges/disadvantages to the 3 main types of ownership - answer-1. Sole proprietorship: advantages- all profit, independent, few regulations,control. Disadvantages- limited access, unlimited personnel liability 2. Partnership: advantages-split responsibility, shared decision making, opportunity for growth. disadvantages-split profits, arguments, no total control 3. Business Franchise: advantages- comes with built reputation, management/training, standardized quality, national advertising programs, financial assistance. Disadvantages: high franchising fee, strict operating standards, purchasing restrictions, limited product line 4. Corporation: advantages-more potential for growth, raise money to grow, no manageral skill for stock holders, gain benefit of limited liability, stock, long lasting. Disadvantages- no control, difficulties to start off, expensive, excessive tax, more regulations, stock price varies Why do some institutions operate as non profit organizations rather than as a business? - answer-to promote the collective interests of its members rather then seek financial gain what are the 3 uses of money - answer-medium of exchange, unit of account, store of value of what importance is the federal reserve and fdic to our society today - answer-federal reserve- served as nations first central bank and reorganized federal banking fdic- protects people from loosing money if bank is unable to repay funds How has the US labor force trend changed over time in terms of the types of jobs people work? - answer-education leads to higher wages. includes growing number of women and temporary workers. the growth in workers earning is slowing but the % of workers increased How do supply and demand in the labor market affect wage levels of workers? - answer-when supply exceeds the demand for labor the wages paid decreased, but if demand exceeds supply wages increase How does the financial system bring together borrowers and savers? - answer-allows the transfer of money between the two what are pros and cons of the following: savings account, cd, savings bond, mutual fund, stocks - answer-1.Savings Account: pro-potential to earn interest, easy to open, secured. Con-minimum balance requirements, lower intrest rates, fees 2.CD: pros-safety, better returns, fixed/predictable returns. Cons-limited liquidity, fees, inflation risk, low returns,risk 3.Savings bond: pro- save automatically, diversify risk, safe investment, low taxes. Cons- early withdrawal penalties waived for 10 day period every 6 months. 4.Mutual fund:Pros- risk reduction,fair pricing. Cons-sales charges, management abuses, tax efficiency, poor trade execution 5.Stocks: pros-potential for higher returns, pay dividends. Cons-can rise or fall dramatically, no guaranteed return What impact do interest rates have on business spending? Consumer Spending? - answer-lower interest rates encourage consumer spending. HIgher rates encourage saving, less spending Identify different phases of business cycle - answer-1.Expansion(period of economic growth). 2.Peak( height of economic expansion, when GDP rises). 3.Recession( period of declining economic growth). 4. Trough( the growth becomes negative) 5. Recovery( period of renewed growth followed by depression/recession) Why can the US government deduct taxes from US citizens and businesses? - answer- Leading causes of inflation - answer-when demand for goods/services exceeds supply available at current prices. When productivity is restricted Why was the Federal Reserve created? - answer-to promote economic stability How does the federal reserve serve the government - answer-government- responsible for implementing monetary policy, finacial agent for buying/selling, sellin gof government securties bank-by clearing checks, monitoring finacial activties, giving commerical banks loans law of comparative advantage - answer-the idea that a nation is better off when it produces goods and services for which it has a comparative advantage