ECN 104 Midterm Exam Questions And
Correct Answers
Economics - answer The social science with how institutions and society make optimal
choices under the condition of scarcity.
Market Economy - answer Based on supply and demand, free market. USA, Canada
Planned Economoy - answer Run by the government, not a free market. North Korea,
China
Microeconomics - answer The study of choices by individuals and businesses, and the
influence of government on those choices. The focus is more on the grains of sand, and
rocks, but not the beach.
Macroeconomics - answer The study of effects on the national and global economy of
the choices that individuals, businesses and governments make. The focus is more on
the beach, and not the grains of sand and rocks.
Opportunity Cost - answer What you must give up to get an item that you want at true
cost. In order to get that new tv, you have to work for 10 more hours, those 10 hours
could also be spent with your friends. It is a tradeoff. (x cost - Marginal benefit)
Marginal Analysis - answer Compare benefits and costs.
Positive Economics - answer Focuses on facts, and cause and effect relationships. No
judgement, purely scientific.
Normative Economics - answer Focuses on judgement, and hypothetical outcomes of
how the economy should operate. Not based on scientific facts.
Scientific method - answer Observing real world behaviours, formulating possible
explanations based on observations, testing the explanation by comparing similar
events to the predicted event, then to accept or reject the hypothesis.
Economic Problem - answer Limited income, and unlimited wants
Ceteris Parabus - answer All other things equal
Purposeful Behaviour - answer Individuals look for and pursue opportunities that
increase their utility
Marginal Cost - answer The cost added by producing one more additional unit.
Comparative Advantage - answer When a country can produce a good at a lower
opportunity cost than another country.
, Production Possibility Frontier - answer A Curve that depicts all maximum outcome
possibilities for two goods, given a set of inputs consisting of resources and other
factors.
Laissez-Faire Capitalism - answer The governments role is left to protect protect private
property, and and establish a legal environment. Australia
The command system - answer Economic decisions are made by a central government
body. North Korea
Market System - answer Property resources are privately owned, markets and prices
are used to direct the economy. USA
Freedom of enterprise - answer Businesses and buy and sell as they choose.
Freedom of choice - answer People can buy and sell their property and move to where
they choose. Consumers can buy what they want.
Self Interest - answer Doing what you can to get the best results for yourself.
The invisible hand - answer When self interest unknowingly and unintentionally turns
into public interest.
Demand - answer A schedule or curve that shows the various amounts a product
consumer are willing and able to pay for an item, during a specific time.
Law of Supply - answer As price rises, quantity rises (less sales). As prices lower,
quantity lowers (more sales).
Equilibrium - answer When the price of something meets the buyers and sellers needs.
Rationing function of prices - answer The ability of competitive forces of supply and
demand to establish a price at which selling and buying are consistent.
Productive Efficiency - answer Producing the right amount of goods, and the lowest
cost, with the best technology.
Allocative Efficency - answer Producing the right amount of each product as per market
demand.
Price Ceiling - answer The maximum legal amount that that a seller may sell a product
Correct Answers
Economics - answer The social science with how institutions and society make optimal
choices under the condition of scarcity.
Market Economy - answer Based on supply and demand, free market. USA, Canada
Planned Economoy - answer Run by the government, not a free market. North Korea,
China
Microeconomics - answer The study of choices by individuals and businesses, and the
influence of government on those choices. The focus is more on the grains of sand, and
rocks, but not the beach.
Macroeconomics - answer The study of effects on the national and global economy of
the choices that individuals, businesses and governments make. The focus is more on
the beach, and not the grains of sand and rocks.
Opportunity Cost - answer What you must give up to get an item that you want at true
cost. In order to get that new tv, you have to work for 10 more hours, those 10 hours
could also be spent with your friends. It is a tradeoff. (x cost - Marginal benefit)
Marginal Analysis - answer Compare benefits and costs.
Positive Economics - answer Focuses on facts, and cause and effect relationships. No
judgement, purely scientific.
Normative Economics - answer Focuses on judgement, and hypothetical outcomes of
how the economy should operate. Not based on scientific facts.
Scientific method - answer Observing real world behaviours, formulating possible
explanations based on observations, testing the explanation by comparing similar
events to the predicted event, then to accept or reject the hypothesis.
Economic Problem - answer Limited income, and unlimited wants
Ceteris Parabus - answer All other things equal
Purposeful Behaviour - answer Individuals look for and pursue opportunities that
increase their utility
Marginal Cost - answer The cost added by producing one more additional unit.
Comparative Advantage - answer When a country can produce a good at a lower
opportunity cost than another country.
, Production Possibility Frontier - answer A Curve that depicts all maximum outcome
possibilities for two goods, given a set of inputs consisting of resources and other
factors.
Laissez-Faire Capitalism - answer The governments role is left to protect protect private
property, and and establish a legal environment. Australia
The command system - answer Economic decisions are made by a central government
body. North Korea
Market System - answer Property resources are privately owned, markets and prices
are used to direct the economy. USA
Freedom of enterprise - answer Businesses and buy and sell as they choose.
Freedom of choice - answer People can buy and sell their property and move to where
they choose. Consumers can buy what they want.
Self Interest - answer Doing what you can to get the best results for yourself.
The invisible hand - answer When self interest unknowingly and unintentionally turns
into public interest.
Demand - answer A schedule or curve that shows the various amounts a product
consumer are willing and able to pay for an item, during a specific time.
Law of Supply - answer As price rises, quantity rises (less sales). As prices lower,
quantity lowers (more sales).
Equilibrium - answer When the price of something meets the buyers and sellers needs.
Rationing function of prices - answer The ability of competitive forces of supply and
demand to establish a price at which selling and buying are consistent.
Productive Efficiency - answer Producing the right amount of goods, and the lowest
cost, with the best technology.
Allocative Efficency - answer Producing the right amount of each product as per market
demand.
Price Ceiling - answer The maximum legal amount that that a seller may sell a product
