ECON 2100 EXAM 1 QUESTIONS AND ANSWERS
Economics - Answer -the social science that studies the choices that individuals,
businesses, governments, & entire societies make as they cope with scarcity & the
incentives that influence those choices
Economics (2) - Answer -the choices we make given the scarcity we face and the
incentives that guide thos choices
6 Key Ideas that define the Economic way of thinking: - Answer -1. a choice is a
tradeoff
2. people make rational choices by comparing benefits & costs
3. Benefits is what you gain from something
4. Cost is what you must give up to get something
5. most choices are "how-much" choices made at the margin
6. Choices respond to incentives
Big Econ Question 1 - Answer -Do choices made in the pursuit of self-interest also
promote the social interest?
(Yes, but it probably was not meant to be that way)
Big Econ Question 2 - Answer -Markets are usually a good way to organize econ
activity, but economists know there are times when markets can fail.
Externalities - Answer -positive or negative consequences (benefits or costs) of
economic activities
Public Goods - Answer -Goods that are neither excludable nor rival in consumption
Tragedy of the Commons - Answer -the tendency of a shared, limited resource to
become depleted or spoiling because people act from self-interest for short-term gain
Econ and the Environment - Answer -explains what we observe in reality, including
environmental problems
Recognize the link between economic activity and the environment using models
Circular Flow Model - Answer -shows the real & monetary flows of econ activity through
the output and factor markets
-forms the basis for modeling the relationship between econ activity & the environment
Does not explicitly show the linkage btwn econ activity & the environment
, Circular Flow Model Diagram - Answer –
Materials Balance Model - Answer -Places the circular flow within a larger schematic to
show links btwn econ activity and the natural environment via 2 sets of flows
Natural Resource Economics - Answer -MBM #1
flow of resources from the environment to the economy
Environmental Economics - Answer -MBM #2
Flow of residuals from the economy to the environment
Residuals - Answer -pollution remianing in the environment after some process has
occured
Residual Delay - Answer -can be delayed, but not prevented through recovery,
recycling, and reuse
(shown as inner flows in the model)
first law of thermodynamics - Answer -Matter & Energy cannot be created or destroyed
second law of thermodynamics - Answer -Nature's capacity to convert matter and
energy is not without bound
when energy is changed from one form to another, some useful energy may become
unusable
MBM Considers: - Answer -pop growth
income growth
increased recycling
tech change
Causes of Environmental Damage - Answer -natural pollutants
Economics - Answer -the social science that studies the choices that individuals,
businesses, governments, & entire societies make as they cope with scarcity & the
incentives that influence those choices
Economics (2) - Answer -the choices we make given the scarcity we face and the
incentives that guide thos choices
6 Key Ideas that define the Economic way of thinking: - Answer -1. a choice is a
tradeoff
2. people make rational choices by comparing benefits & costs
3. Benefits is what you gain from something
4. Cost is what you must give up to get something
5. most choices are "how-much" choices made at the margin
6. Choices respond to incentives
Big Econ Question 1 - Answer -Do choices made in the pursuit of self-interest also
promote the social interest?
(Yes, but it probably was not meant to be that way)
Big Econ Question 2 - Answer -Markets are usually a good way to organize econ
activity, but economists know there are times when markets can fail.
Externalities - Answer -positive or negative consequences (benefits or costs) of
economic activities
Public Goods - Answer -Goods that are neither excludable nor rival in consumption
Tragedy of the Commons - Answer -the tendency of a shared, limited resource to
become depleted or spoiling because people act from self-interest for short-term gain
Econ and the Environment - Answer -explains what we observe in reality, including
environmental problems
Recognize the link between economic activity and the environment using models
Circular Flow Model - Answer -shows the real & monetary flows of econ activity through
the output and factor markets
-forms the basis for modeling the relationship between econ activity & the environment
Does not explicitly show the linkage btwn econ activity & the environment
, Circular Flow Model Diagram - Answer –
Materials Balance Model - Answer -Places the circular flow within a larger schematic to
show links btwn econ activity and the natural environment via 2 sets of flows
Natural Resource Economics - Answer -MBM #1
flow of resources from the environment to the economy
Environmental Economics - Answer -MBM #2
Flow of residuals from the economy to the environment
Residuals - Answer -pollution remianing in the environment after some process has
occured
Residual Delay - Answer -can be delayed, but not prevented through recovery,
recycling, and reuse
(shown as inner flows in the model)
first law of thermodynamics - Answer -Matter & Energy cannot be created or destroyed
second law of thermodynamics - Answer -Nature's capacity to convert matter and
energy is not without bound
when energy is changed from one form to another, some useful energy may become
unusable
MBM Considers: - Answer -pop growth
income growth
increased recycling
tech change
Causes of Environmental Damage - Answer -natural pollutants
