ECO 201 FINAL EXAM 2025/2026
QUESTIONS AND ANSWERS 100% PASS.
CHAPTER 1 - 10 PRINCIPLES OF ECONOMICS
Economics - ANS The study of humans coordinating their wants; The study of the choices that
individuals make given the presence of scarcity
Scarcity - ANS Limited resources but the unlimited wants
*We all face it - even the richest person in the world
Types of Resources - ANS 1. Land (water, air, oil, land, natural resources)
2. Nonhuman animal resources
3. Labor (human capital - physical and mental)
4. Capital (resources produced using land and labor - man-made)
5. Technology
6. Entrepreneurial ability
Goods and Services - ANS
8 Principles of Economics - ANS 1. People Face Trade Offs
2. The Cost of Something is What You Give Up to Get It
3. Rational People (Weigh Costs & Benefits and Think at Margin)
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,4. People Respond to Incentives
5. Trade Can Make Everyone Better
6. Markets are Usually a Good Way to Organize
7. Governments Can Sometimes Improve Market Outcomes
8. A Country's Standard of Living Depends on its Ability to Produce Goods and Services
Principle #1: People Face Trade Offs - ANS Scarcity forces us to make choices
Principle #2: The Cost of Something is What You Give Up to Get It - ANS Opportunity cost;
Not the sum of all forgone activities; subjective
Principle #3: Rational People (Weigh Costs & Benefits and Think at Margin) - ANS Marginal =
End; Marginal changes are adjustments around the edges of what you are doing
Principle #4: People Respond to Incentives - ANS Something that induces a person to act;
Such as the prospect of a punishment or reward
Principle #5: Trade Can Make Everyone Better Off - ANS When individuals engages in a
voluntary exchange, both parties are made better off
Principle #6: Markets are Usually a Good Way to Organize - ANS Supply and demand in a
market economy
Principle #7: Governments Can Sometimes Improve Market Outcomes - ANS Regulate
(prevent financial disasters) and mandate (manage its bank account)
Principle #8: A Country's Standard of Living Depends on its Ability to Produce Goods and
Services - ANS Measures the quality of life based on the goods and services produced from
each unit of labor
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,The economy - ANS The institutional structure through which individuals in a society
coordinate their diverse wants
Invisible Hand - ANS The price mechanism; Guides economic forces to coordinate actions and
allocate resources
Invisible Handshake - ANS Social and historical forces and cultural norms that influence
market outcomes
Invisible Foot - ANS Political and legal forces in the market influencing market outcomes
3 Economic Questions (Must be answered in an economy) - ANS 1. What, and how much, to
produce?
2. How to produce?
3. For whom to produce?
Opportunity Costs - ANS Highest value benefit forgone due choosing an alternative
Sunk Costs - ANS Has already been incurred and cannot be recovered
Private Property Rights - ANS The ability of an individual to own and exercise control over
scarce resources
Private Property Rights - Importance - ANS Exclusively held by an owner and protected
against invasion by others (can be transferred, sold, and/or mortgaged)
Efficiency - ANS The property of society getting the most it can from its scarce/limited
resources (the size of the economic pie)
Equality - ANS The property of distributing economic property uniformly among the
members of society (how the economic pie is sliced)
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Economically Rational - ANS Decision Makers
- Systematically and purposefully doing the best they can to achieve their objectives
Marginal Thinking - ANS Change
- Describes a small incremental adjustment to an existing plan of action
*Marginal = end, so marginal changes are the adjustments around the edges of what you are
doing
Weighing the Costs and Benefits - ANS
Are Costs and Benefits Subjective - ANS Yes
Marginal Analysis - ANS
Marginal Benefit = Marginal Cost - ANS We do things to the point where...
*Point of Equilibrium
Economic Decision Rule - ANS If the marginal (incremental) benefit of an action exceeds the
marginal (incremental) cost, do it!
*If MC > MB, don't do it
Incentives - ANS Something that induces a person to act
*Such as the prospect of a punishment or reward
Five Facts about Trade - ANS 1. Trade is not a zero sum game: When individuals engage in
voluntary exchange, both parties are made better off
2. By channeling goods and resources to those who value them most, trade creates value and
increases the wealth created by a society's resources
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
QUESTIONS AND ANSWERS 100% PASS.
CHAPTER 1 - 10 PRINCIPLES OF ECONOMICS
Economics - ANS The study of humans coordinating their wants; The study of the choices that
individuals make given the presence of scarcity
Scarcity - ANS Limited resources but the unlimited wants
*We all face it - even the richest person in the world
Types of Resources - ANS 1. Land (water, air, oil, land, natural resources)
2. Nonhuman animal resources
3. Labor (human capital - physical and mental)
4. Capital (resources produced using land and labor - man-made)
5. Technology
6. Entrepreneurial ability
Goods and Services - ANS
8 Principles of Economics - ANS 1. People Face Trade Offs
2. The Cost of Something is What You Give Up to Get It
3. Rational People (Weigh Costs & Benefits and Think at Margin)
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,4. People Respond to Incentives
5. Trade Can Make Everyone Better
6. Markets are Usually a Good Way to Organize
7. Governments Can Sometimes Improve Market Outcomes
8. A Country's Standard of Living Depends on its Ability to Produce Goods and Services
Principle #1: People Face Trade Offs - ANS Scarcity forces us to make choices
Principle #2: The Cost of Something is What You Give Up to Get It - ANS Opportunity cost;
Not the sum of all forgone activities; subjective
Principle #3: Rational People (Weigh Costs & Benefits and Think at Margin) - ANS Marginal =
End; Marginal changes are adjustments around the edges of what you are doing
Principle #4: People Respond to Incentives - ANS Something that induces a person to act;
Such as the prospect of a punishment or reward
Principle #5: Trade Can Make Everyone Better Off - ANS When individuals engages in a
voluntary exchange, both parties are made better off
Principle #6: Markets are Usually a Good Way to Organize - ANS Supply and demand in a
market economy
Principle #7: Governments Can Sometimes Improve Market Outcomes - ANS Regulate
(prevent financial disasters) and mandate (manage its bank account)
Principle #8: A Country's Standard of Living Depends on its Ability to Produce Goods and
Services - ANS Measures the quality of life based on the goods and services produced from
each unit of labor
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,The economy - ANS The institutional structure through which individuals in a society
coordinate their diverse wants
Invisible Hand - ANS The price mechanism; Guides economic forces to coordinate actions and
allocate resources
Invisible Handshake - ANS Social and historical forces and cultural norms that influence
market outcomes
Invisible Foot - ANS Political and legal forces in the market influencing market outcomes
3 Economic Questions (Must be answered in an economy) - ANS 1. What, and how much, to
produce?
2. How to produce?
3. For whom to produce?
Opportunity Costs - ANS Highest value benefit forgone due choosing an alternative
Sunk Costs - ANS Has already been incurred and cannot be recovered
Private Property Rights - ANS The ability of an individual to own and exercise control over
scarce resources
Private Property Rights - Importance - ANS Exclusively held by an owner and protected
against invasion by others (can be transferred, sold, and/or mortgaged)
Efficiency - ANS The property of society getting the most it can from its scarce/limited
resources (the size of the economic pie)
Equality - ANS The property of distributing economic property uniformly among the
members of society (how the economic pie is sliced)
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, Economically Rational - ANS Decision Makers
- Systematically and purposefully doing the best they can to achieve their objectives
Marginal Thinking - ANS Change
- Describes a small incremental adjustment to an existing plan of action
*Marginal = end, so marginal changes are the adjustments around the edges of what you are
doing
Weighing the Costs and Benefits - ANS
Are Costs and Benefits Subjective - ANS Yes
Marginal Analysis - ANS
Marginal Benefit = Marginal Cost - ANS We do things to the point where...
*Point of Equilibrium
Economic Decision Rule - ANS If the marginal (incremental) benefit of an action exceeds the
marginal (incremental) cost, do it!
*If MC > MB, don't do it
Incentives - ANS Something that induces a person to act
*Such as the prospect of a punishment or reward
Five Facts about Trade - ANS 1. Trade is not a zero sum game: When individuals engage in
voluntary exchange, both parties are made better off
2. By channeling goods and resources to those who value them most, trade creates value and
increases the wealth created by a society's resources
4 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
