ECON 201 EXAM #1 Terms
Questions and Answers 100% Pass
Economics - ✔✔The study of the choices consumers, business managers, and
government officials make to attain their foals, give scarce resources.
Scarcity - ✔✔Although our wants are unlimited, the resources available are not.
3 Key Economic Ideas - ✔✔People are rational. People respond to economics incentives.
Optimal decisions are made at the margin.
Tradeoffs - ✔✔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.
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.
Market Economy - ✔✔Households and firms
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, Centrally Planned - ✔✔Government
Mixed Economy - ✔✔An economy in which most economic decisions result from the
interaction of buyers and sellers in markets but in which the government plays a
significant role in the allocation of resources.
Productive Efficiency - ✔✔When a good or service is produced at the lowest possible
cost.
Allocative Efficiency - ✔✔A state of the economy in which production is in accordance
with consumer preferences; in particular, every good or service is produced up to the
point where the last unit provides a marginal benefit to society equal to the marginal
cost of producing it.
Steps Economists use to make a useful economic model - ✔✔Decide on the assumptions
to use in developing the model. Formulate a testable hypothesis. Use economic data to
test the hypothesis. Revise the model if it fails to explain the economic data well. Retain
the revised model to help answer similar economic questions in the future.
Economic Variable - ✔✔Something measurable that can have different values, such as
the incomes of doctors.
Hypothesis - ✔✔Statement that can be correct or incorrect about an economic variable.
Equity - ✔✔The fair distribution of economic benefits.
Positive Analysis - ✔✔Analysis concerned with what is.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
Questions and Answers 100% Pass
Economics - ✔✔The study of the choices consumers, business managers, and
government officials make to attain their foals, give scarce resources.
Scarcity - ✔✔Although our wants are unlimited, the resources available are not.
3 Key Economic Ideas - ✔✔People are rational. People respond to economics incentives.
Optimal decisions are made at the margin.
Tradeoffs - ✔✔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.
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.
Market Economy - ✔✔Households and firms
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
, Centrally Planned - ✔✔Government
Mixed Economy - ✔✔An economy in which most economic decisions result from the
interaction of buyers and sellers in markets but in which the government plays a
significant role in the allocation of resources.
Productive Efficiency - ✔✔When a good or service is produced at the lowest possible
cost.
Allocative Efficiency - ✔✔A state of the economy in which production is in accordance
with consumer preferences; in particular, every good or service is produced up to the
point where the last unit provides a marginal benefit to society equal to the marginal
cost of producing it.
Steps Economists use to make a useful economic model - ✔✔Decide on the assumptions
to use in developing the model. Formulate a testable hypothesis. Use economic data to
test the hypothesis. Revise the model if it fails to explain the economic data well. Retain
the revised model to help answer similar economic questions in the future.
Economic Variable - ✔✔Something measurable that can have different values, such as
the incomes of doctors.
Hypothesis - ✔✔Statement that can be correct or incorrect about an economic variable.
Equity - ✔✔The fair distribution of economic benefits.
Positive Analysis - ✔✔Analysis concerned with what is.
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
