ECON-B 251 EXAM 1 FULL TEST WITH COMPLETE SOLUTIONS
Revenuebequationb-bcorrectbanswer-PricebxbQuantityb(P*Q).
Ratebofbchangeb-bcorrectbanswer-Price/Quantityb(P/Q)
-bForbablinearbrelationship,bthisbisbconsistentbacrossbthebequation
-
Forbabnonlinearbequation,bthisbcanbbebextractedbasbthebtangentbofbabspecificbpointbonbthe
bequation.
Economicsb-bcorrectbanswer-Thebstudybofballocationbofbscarcebresources.
Microeconomicsb-bcorrectbanswer-
Studybofbdecisionbmakingbbybindividuals,bhouseholds,borbfirmsb(pollution,bcrime,bhealthb
care,beducation).
Macroeconomicsb-bcorrectbanswer-
Studybofbthebbehaviorbofbthebeconomybasbabwholeb(inflation,btaxes,bunemployment).
Rationalitybassumptionb-bcorrectbanswer-
Assumptionbthatbpeoplebdobnotbintentionallybmakebdecisionsbthatbwouldbleavebthembwor
seboff.
Boundedbrationalityb-bcorrectbanswer-
Peoplebdobnotbalwaysbbehavebrationally,bduebto:basymmetricbinformation,blackbofbtime/a
bility/resources,bbias,bemotion,buncertainty,brisk.
Prospectbtheoryb-bcorrectbanswer-
Peoplebchoosebtobtakebonbriskbwhenbevaluatingbpotentialblossesbandbavoidbrisksbwhenbe
valuatingbpotentialbgains.
Lossbaversionb-bcorrectbanswer-
Thebstrongbtendencybtobregardblossesbasbconsiderablybmorebimportantbthanbgains.
Self-interestb-bcorrectbanswer-
Economistsbassumebthatbpeoplebmakebdecisionsbinbthisbway,bintendedbtobmakebthebdec
ision-makerbbetterboffbwithoutbconsideringbothers.
, Socialbinterestb-bcorrectbanswer-
Decisionsbmadebinbthisbwaybarebconsideredbtobbebthebbestbdecisionbforbsocietybasbabwh
ole,btakingbintobaccountbefficiencybandbequity.
Incentivizingbsocialbinterestb-bcorrectbanswer-
Governmentsbmaybplacebpunishmentsborbsubsidiesbinborderbforbpeoplebtobactbinbsocialbi
nterestbasbopposedbtobself-interest.
Economicbmodelsb-bcorrectbanswer-
Simplificationsbofbrealitybthatbhelpbthebunderstandingbofbpatternsbandbsimilaritiesbacross
bdifferentbsituations,busefulbabstractionsbofbreality.
Marginalbeffectb-bcorrectbanswer-
Thebeffectbonbthebdependentbvariablebthatbresultsbfrombchangingbanbindependentbvaria
blebbybabsmallbamount.
Ceterisbparibusb-bcorrectbanswer-Keepingballbotherbfactorsbconstantbinbabmodel.
Scarcitybprincipleb-bcorrectbanswer-
Notbenoughbresourcesbarebavailablebtobsatisfyballbwants,bsoballbactionsbhavebtradeoffs.
Directbcostsb-bcorrectbanswer-Costsbthatbarebspecificallybassociatedbwithbanbaction.
Opportunitybcostb-bcorrectbanswer-Costbofbrulingboutbalternativebactions--
>bthebvaluebofbthebnextbbestbforegonebalternativebaction.
Opportunitybcostbequationb-bcorrectbanswer-Opportunitybcostb=bBenefitsb-bCosts.
Positivebeconomicsb-bcorrectbanswer-
Descriptivebstatementsborbscientificbpredictions,btestedbbybcheckingbagainstbfacts.
Normativebeconomicsb-bcorrectbanswer-
Valuebjudgementsbaboutbwhatbindividualsbshouldbchoose,bcannotbbebtested.
Factorsbofbproductionb-bcorrectbanswer-
Land,blabor,bentrepreneurship,bcapitalb(physicalbcapitalb+bhumanbcapital).
Economicbsurplusbinbanbopportunitybcostbproblemb-bcorrectbanswer-
Valuebofbcurrentbchoiceb-bOpportunitybcost.
Marginalbcost-benefitbprincipleb-bcorrectbanswer-
Takebanbactionbonlybifbthebextrabbenefitsb(monetaryb+bnon-
monetary)barebatbleastbasbgreatbasbthebextrabcosts.
Sunkbcostsb-bcorrectbanswer-
Costsbthatbcannotbbebrecoveredbbybtakingbanybalternativebchoice,bshouldbnotbbebconsid
eredbwhenbmakingbdecisions.
Revenuebequationb-bcorrectbanswer-PricebxbQuantityb(P*Q).
Ratebofbchangeb-bcorrectbanswer-Price/Quantityb(P/Q)
-bForbablinearbrelationship,bthisbisbconsistentbacrossbthebequation
-
Forbabnonlinearbequation,bthisbcanbbebextractedbasbthebtangentbofbabspecificbpointbonbthe
bequation.
Economicsb-bcorrectbanswer-Thebstudybofballocationbofbscarcebresources.
Microeconomicsb-bcorrectbanswer-
Studybofbdecisionbmakingbbybindividuals,bhouseholds,borbfirmsb(pollution,bcrime,bhealthb
care,beducation).
Macroeconomicsb-bcorrectbanswer-
Studybofbthebbehaviorbofbthebeconomybasbabwholeb(inflation,btaxes,bunemployment).
Rationalitybassumptionb-bcorrectbanswer-
Assumptionbthatbpeoplebdobnotbintentionallybmakebdecisionsbthatbwouldbleavebthembwor
seboff.
Boundedbrationalityb-bcorrectbanswer-
Peoplebdobnotbalwaysbbehavebrationally,bduebto:basymmetricbinformation,blackbofbtime/a
bility/resources,bbias,bemotion,buncertainty,brisk.
Prospectbtheoryb-bcorrectbanswer-
Peoplebchoosebtobtakebonbriskbwhenbevaluatingbpotentialblossesbandbavoidbrisksbwhenbe
valuatingbpotentialbgains.
Lossbaversionb-bcorrectbanswer-
Thebstrongbtendencybtobregardblossesbasbconsiderablybmorebimportantbthanbgains.
Self-interestb-bcorrectbanswer-
Economistsbassumebthatbpeoplebmakebdecisionsbinbthisbway,bintendedbtobmakebthebdec
ision-makerbbetterboffbwithoutbconsideringbothers.
, Socialbinterestb-bcorrectbanswer-
Decisionsbmadebinbthisbwaybarebconsideredbtobbebthebbestbdecisionbforbsocietybasbabwh
ole,btakingbintobaccountbefficiencybandbequity.
Incentivizingbsocialbinterestb-bcorrectbanswer-
Governmentsbmaybplacebpunishmentsborbsubsidiesbinborderbforbpeoplebtobactbinbsocialbi
nterestbasbopposedbtobself-interest.
Economicbmodelsb-bcorrectbanswer-
Simplificationsbofbrealitybthatbhelpbthebunderstandingbofbpatternsbandbsimilaritiesbacross
bdifferentbsituations,busefulbabstractionsbofbreality.
Marginalbeffectb-bcorrectbanswer-
Thebeffectbonbthebdependentbvariablebthatbresultsbfrombchangingbanbindependentbvaria
blebbybabsmallbamount.
Ceterisbparibusb-bcorrectbanswer-Keepingballbotherbfactorsbconstantbinbabmodel.
Scarcitybprincipleb-bcorrectbanswer-
Notbenoughbresourcesbarebavailablebtobsatisfyballbwants,bsoballbactionsbhavebtradeoffs.
Directbcostsb-bcorrectbanswer-Costsbthatbarebspecificallybassociatedbwithbanbaction.
Opportunitybcostb-bcorrectbanswer-Costbofbrulingboutbalternativebactions--
>bthebvaluebofbthebnextbbestbforegonebalternativebaction.
Opportunitybcostbequationb-bcorrectbanswer-Opportunitybcostb=bBenefitsb-bCosts.
Positivebeconomicsb-bcorrectbanswer-
Descriptivebstatementsborbscientificbpredictions,btestedbbybcheckingbagainstbfacts.
Normativebeconomicsb-bcorrectbanswer-
Valuebjudgementsbaboutbwhatbindividualsbshouldbchoose,bcannotbbebtested.
Factorsbofbproductionb-bcorrectbanswer-
Land,blabor,bentrepreneurship,bcapitalb(physicalbcapitalb+bhumanbcapital).
Economicbsurplusbinbanbopportunitybcostbproblemb-bcorrectbanswer-
Valuebofbcurrentbchoiceb-bOpportunitybcost.
Marginalbcost-benefitbprincipleb-bcorrectbanswer-
Takebanbactionbonlybifbthebextrabbenefitsb(monetaryb+bnon-
monetary)barebatbleastbasbgreatbasbthebextrabcosts.
Sunkbcostsb-bcorrectbanswer-
Costsbthatbcannotbbebrecoveredbbybtakingbanybalternativebchoice,bshouldbnotbbebconsid
eredbwhenbmakingbdecisions.
