BSNS 113 Revision Final Exam
Questions And 100% Correct\Verified
Answers Graded A+ 2025\2026 Updated.
What are the three economic questions? - Answer What to produce? How to produce? For
whom to produce?
Is a Normative statement fact or opinion? - Answer Opinion
Is a Positive statement fact or opinion? - Answer Fact
What is GDP? - Answer It aims to measure the market value for all final goods and services in a
given period of time.
What are the 3 types of resources? - Answer Land, Labour, Capital
What is the function of the quantity of goods produced? - Answer f(Qresources, Qtechnology,
Qtime, Qservices)
If a market is producing on the line of the PPF, what does that mean? - Answer All resources
are efficiently employed and the combinations are technically efficient
Relative to a PPF graph, if the production in a market is below the PPF line, what does that
mean? - Answer This is technical inefficiency , and more can be produced with the same
resources
What is Comparative advantage? - Answer Having the lower opportunity cost against another
What is Absolute advantage? - Answer Producing more of a good or service in a given amount
of time
How do you work out the terms of trade? - Answer Figure out a relative price where both
people trading benefit
,What does the opportunity cost also include? - Answer implicit costs like satisfaction and
experience as well as consumer surplus for the opportunity cost of What not picking something
What are the benefits to tradees joining together to form a business compared to if they were
to work on their own, specialise and trade? - Answer They will be more cost effective,
decreasing transportation costs, scheduling work is easier and decreased admin costs
What do combinations on the LRAC curve show? - Answer The minimum cost of production
produced at a given time, given the input prices and technology
What do combinations above the LRAC curve represent? - Answer Production costs higher
than the lowest possible
What are some reasons for the LRAC lowering? - Answer Specialisation of inputs and
diminishing return from additional input specialisation
What shifts the LRAC? - Answer quantity produced in a given period of time, input prices and
the state of technology
What is a market? - Answer A group of buyers and sellers whose interactions determine the
price at which a good or service trades
What are 3 ways we use money? - Answer Unit of account, Medium of exchange, and store of
value
Why do demand curves slope downwards? - Answer The "substitute effect"
If your company decreases their prices, consumers will "substitute out" whatever they used to
do for their cheaper alternative
The "income effect"
If the price of an item decreases, consumers purchasing power decreases, meaning they can
buy more with the same income they had
What is the law of diminishing return? - Answer The law of diminishing return applies, where
with additions of a variable factor (pizza) over time to the fixed factor of production (stomach),
, How do you maximise net benefit from consumption? - Answer As long as Marginal consumer
benefit is less than or equal to price
What is meant by the "vertical" interpretation of a demand graph? - Answer Marginal
consumer benefit is measured in $ and the quantity of a good appears in decreasing order of
Marginal benefit
What is meant by the "horizontal" interpretation of a demand graph? - Answer Qd is Quantity
demanded and P is price/unit, measured in $
What is marginal cost? - Answer the cost of producing one more unit of a good
How does a supplier maximise net benefit from production? - Answer If the Marginal costs are
more than or equal to price
What is meant by the "vertical" interpretation of a supply diagram? - Answer Marginal cost is
measured in dollars, and the quantity of units of a good are in increasing order of Marginal cost
What is meant by the "horizontal" interpretation of a supply diagram? - Answer Qs is quantity
supplied and P, price/unit, is measured in dollars
What happens when quantity supplied equals quantity demanded? - Answer The market
"clears"
What are some shift variables for Quantity Demanded? - Answer Income, Price of related
goods, Number of consumers, Expectations of future prices, and Tastes
What are some shift variables for Quantity supplied? - Answer Price of inputs, Number of
suppliers, Technology, and Expectations of future prices
What happens if both S and D curves shift down? - Answer The quantity at equilibrium
decreases, but the change in the price at equilibrium if indeterminant
What happens if both S and D curves shift up? - Answer The quantity at equilibrium increases,
Questions And 100% Correct\Verified
Answers Graded A+ 2025\2026 Updated.
What are the three economic questions? - Answer What to produce? How to produce? For
whom to produce?
Is a Normative statement fact or opinion? - Answer Opinion
Is a Positive statement fact or opinion? - Answer Fact
What is GDP? - Answer It aims to measure the market value for all final goods and services in a
given period of time.
What are the 3 types of resources? - Answer Land, Labour, Capital
What is the function of the quantity of goods produced? - Answer f(Qresources, Qtechnology,
Qtime, Qservices)
If a market is producing on the line of the PPF, what does that mean? - Answer All resources
are efficiently employed and the combinations are technically efficient
Relative to a PPF graph, if the production in a market is below the PPF line, what does that
mean? - Answer This is technical inefficiency , and more can be produced with the same
resources
What is Comparative advantage? - Answer Having the lower opportunity cost against another
What is Absolute advantage? - Answer Producing more of a good or service in a given amount
of time
How do you work out the terms of trade? - Answer Figure out a relative price where both
people trading benefit
,What does the opportunity cost also include? - Answer implicit costs like satisfaction and
experience as well as consumer surplus for the opportunity cost of What not picking something
What are the benefits to tradees joining together to form a business compared to if they were
to work on their own, specialise and trade? - Answer They will be more cost effective,
decreasing transportation costs, scheduling work is easier and decreased admin costs
What do combinations on the LRAC curve show? - Answer The minimum cost of production
produced at a given time, given the input prices and technology
What do combinations above the LRAC curve represent? - Answer Production costs higher
than the lowest possible
What are some reasons for the LRAC lowering? - Answer Specialisation of inputs and
diminishing return from additional input specialisation
What shifts the LRAC? - Answer quantity produced in a given period of time, input prices and
the state of technology
What is a market? - Answer A group of buyers and sellers whose interactions determine the
price at which a good or service trades
What are 3 ways we use money? - Answer Unit of account, Medium of exchange, and store of
value
Why do demand curves slope downwards? - Answer The "substitute effect"
If your company decreases their prices, consumers will "substitute out" whatever they used to
do for their cheaper alternative
The "income effect"
If the price of an item decreases, consumers purchasing power decreases, meaning they can
buy more with the same income they had
What is the law of diminishing return? - Answer The law of diminishing return applies, where
with additions of a variable factor (pizza) over time to the fixed factor of production (stomach),
, How do you maximise net benefit from consumption? - Answer As long as Marginal consumer
benefit is less than or equal to price
What is meant by the "vertical" interpretation of a demand graph? - Answer Marginal
consumer benefit is measured in $ and the quantity of a good appears in decreasing order of
Marginal benefit
What is meant by the "horizontal" interpretation of a demand graph? - Answer Qd is Quantity
demanded and P is price/unit, measured in $
What is marginal cost? - Answer the cost of producing one more unit of a good
How does a supplier maximise net benefit from production? - Answer If the Marginal costs are
more than or equal to price
What is meant by the "vertical" interpretation of a supply diagram? - Answer Marginal cost is
measured in dollars, and the quantity of units of a good are in increasing order of Marginal cost
What is meant by the "horizontal" interpretation of a supply diagram? - Answer Qs is quantity
supplied and P, price/unit, is measured in dollars
What happens when quantity supplied equals quantity demanded? - Answer The market
"clears"
What are some shift variables for Quantity Demanded? - Answer Income, Price of related
goods, Number of consumers, Expectations of future prices, and Tastes
What are some shift variables for Quantity supplied? - Answer Price of inputs, Number of
suppliers, Technology, and Expectations of future prices
What happens if both S and D curves shift down? - Answer The quantity at equilibrium
decreases, but the change in the price at equilibrium if indeterminant
What happens if both S and D curves shift up? - Answer The quantity at equilibrium increases,
