ECO 201 Miami University Final
Exam Questions and Answers 100%
Pass
market - ✔✔a group of buyers and sellers of a good or service and the institution or
arrangement by which they come together to trade
economic assumptions (3 of them) - ✔✔people are rational
people respond to economic incentives
optimal decisions are made at the margin
economics - ✔✔the study of the choices consumers, business managers, and
government officials make to attain their goals, given scarce resources
economic models - ✔✔simplified versions of reality used to analyze real-life economic
situations
marginal - ✔✔"more" or "extra"
marginal benefit - ✔✔additional benefit received from extra activity/quantity
marginal cost - ✔✔additional cost incurred from extra activity/quantity
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
,economic optimal decisions - ✔✔continue any activity up to the point where the
marginal benefit equals the marginal cost
marginal analysis - ✔✔analysis that involves comparing marginal benefits and marginal
costs
trade-offs - ✔✔the idea that because of scarcity, producing more of one good or service
means producing less of another good or service
opportunity cost - ✔✔the highest-valued alternative that must be given up to engage in
an activity ; forgone benefit by choosing one alternative over another
centrally planned economy - ✔✔an economy in which the government decides how
economic resources will be allocated
market economy - ✔✔an economy in which the decisions of households and firms
interacting in markets allocate economic resources
mixed economy - ✔✔an economy in which elements of both a centrally planned
economy and a market economy exist ; most economic decisions result from the
interaction of buyers and sellers in markets, but the government plays a significant role
in the allocation of economic resources
productive efficiency - ✔✔a situation in which a good or service is produced at the
lowest possible cost ; firms produce at the minimum point of ATC
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
,allocative efficiency - ✔✔a state of the economy in which production is in accordance
with consumer preferences; every good or service is produced UP to the point where
the last unit provides a marginal benefit equal to the marginal cost of production ; firms
charge a price equal to MC
voluntary exchange - ✔✔a situation that occurs in markets when both the buyer and
seller of a product are made better off by the transaction
equity - ✔✔the fair distribution of economic benefits
causal relationship - ✔✔economic assumptions/hypotheses are usually about these ;
cause-and-effect relationship
economic variable - ✔✔something measurable that can have different values, such as
the wages of software programmers
positive analysis - ✔✔economic analysis resulting from economic models that is
concerned with "what is" ; reality
normative analysis - ✔✔analysis resulting from models that is concerned with "what
ought to be"
microeconomics - ✔✔the study of how households and firms make choices, how they
interact in markets, and how the government attempts to influence their choices
macroeconomics - ✔✔the study of the economy as a whole: inflation, unemployment,
economic growth, etc. explains why economies experience periods of recession
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
, percent change formula - ✔✔percentage change = 100((x2 - x1)/(x1))
production possibilities frontier - ✔✔a curve showing the maximum attainable
combinations of two products that may be produced with available resources and
current technology ; as the economy moves down it, it experiences increasing marginal
opportunity costs.
increasing marginal costs - ✔✔the more resources already devoted to an activity, the
smaller the payoff to devoting additional resources to that activity
economic growth - ✔✔the ability of the economy to increase the production of goods
and services
trade - ✔✔the act of buying and selling ; results from comparative advantage, not
absolute advantage
absolute advantage - ✔✔the ability of an individual, a firm, or a country to produce
more of a good or service than competitors, using the same amount of resources
comparative advantage - ✔✔the ability of an individual, a firm, or a country to produce
a good or service at a lower opportunity cost than competitors
product market - ✔✔a market for goods ; households are demanders and firms are
suppliers
factor markets ; factors of production - ✔✔factor markets: markets for the factors of
production
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 4
Exam Questions and Answers 100%
Pass
market - ✔✔a group of buyers and sellers of a good or service and the institution or
arrangement by which they come together to trade
economic assumptions (3 of them) - ✔✔people are rational
people respond to economic incentives
optimal decisions are made at the margin
economics - ✔✔the study of the choices consumers, business managers, and
government officials make to attain their goals, given scarce resources
economic models - ✔✔simplified versions of reality used to analyze real-life economic
situations
marginal - ✔✔"more" or "extra"
marginal benefit - ✔✔additional benefit received from extra activity/quantity
marginal cost - ✔✔additional cost incurred from extra activity/quantity
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
,economic optimal decisions - ✔✔continue any activity up to the point where the
marginal benefit equals the marginal cost
marginal analysis - ✔✔analysis that involves comparing marginal benefits and marginal
costs
trade-offs - ✔✔the idea that because of scarcity, producing more of one good or service
means producing less of another good or service
opportunity cost - ✔✔the highest-valued alternative that must be given up to engage in
an activity ; forgone benefit by choosing one alternative over another
centrally planned economy - ✔✔an economy in which the government decides how
economic resources will be allocated
market economy - ✔✔an economy in which the decisions of households and firms
interacting in markets allocate economic resources
mixed economy - ✔✔an economy in which elements of both a centrally planned
economy and a market economy exist ; most economic decisions result from the
interaction of buyers and sellers in markets, but the government plays a significant role
in the allocation of economic resources
productive efficiency - ✔✔a situation in which a good or service is produced at the
lowest possible cost ; firms produce at the minimum point of ATC
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
,allocative efficiency - ✔✔a state of the economy in which production is in accordance
with consumer preferences; every good or service is produced UP to the point where
the last unit provides a marginal benefit equal to the marginal cost of production ; firms
charge a price equal to MC
voluntary exchange - ✔✔a situation that occurs in markets when both the buyer and
seller of a product are made better off by the transaction
equity - ✔✔the fair distribution of economic benefits
causal relationship - ✔✔economic assumptions/hypotheses are usually about these ;
cause-and-effect relationship
economic variable - ✔✔something measurable that can have different values, such as
the wages of software programmers
positive analysis - ✔✔economic analysis resulting from economic models that is
concerned with "what is" ; reality
normative analysis - ✔✔analysis resulting from models that is concerned with "what
ought to be"
microeconomics - ✔✔the study of how households and firms make choices, how they
interact in markets, and how the government attempts to influence their choices
macroeconomics - ✔✔the study of the economy as a whole: inflation, unemployment,
economic growth, etc. explains why economies experience periods of recession
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
, percent change formula - ✔✔percentage change = 100((x2 - x1)/(x1))
production possibilities frontier - ✔✔a curve showing the maximum attainable
combinations of two products that may be produced with available resources and
current technology ; as the economy moves down it, it experiences increasing marginal
opportunity costs.
increasing marginal costs - ✔✔the more resources already devoted to an activity, the
smaller the payoff to devoting additional resources to that activity
economic growth - ✔✔the ability of the economy to increase the production of goods
and services
trade - ✔✔the act of buying and selling ; results from comparative advantage, not
absolute advantage
absolute advantage - ✔✔the ability of an individual, a firm, or a country to produce
more of a good or service than competitors, using the same amount of resources
comparative advantage - ✔✔the ability of an individual, a firm, or a country to produce
a good or service at a lower opportunity cost than competitors
product market - ✔✔a market for goods ; households are demanders and firms are
suppliers
factor markets ; factors of production - ✔✔factor markets: markets for the factors of
production
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 4
