ECON-B 251 EXAM 1 COMPREHENSIVE TEST
PAPER 2026 SOLUTIONS VERIFIED
◉ decreasing marginal benefit. Answer: the maximum amount of
money a consumer is willing to pay for an additional good or service
is decreasing.
◉ production efficiency. Answer: we cannot produce additional
amounts of a good without decreasing the production amount of
another product
◉ allocative efficiency. Answer: every good or service is produced up
to the point where the last unit provides a marginal benefit to
consumers equal to the marginal cost of producing
◉ inefficiency. Answer: any point inside the PPC
◉ comparative advantage. Answer: the ability to produce a good at a
lower opportunity cost than another producer
◉ absolute advantage. Answer: producing a greater quantity of a
good, or service than competitors, using the same amount of
resources.
,◉ Specialization. Answer: put all production into one good or
service
◉ economic growth. Answer: what does a shifting out of the PPC
represent?
◉ consumer goods. Answer: goods produced for personal
satisfaction
◉ capital goods. Answer: goods used to produce other goods
◉ per-worker production function. Answer: used to illustrate long
run economic growth using the factors of production along with
other variables, such as technology.
◉ law of diminishing returns. Answer: A decrease in a firm's
marginal output from adding an additional unit of input.
◉ market. Answer: arrangements (or location) that individuals have
for exchanging with one another.
◉ markets & prices. Answer: an economic system that allocates
resources based on relative prices determined by supply and
demand
, ◉ demand. Answer: quantities of specific goods or services that
individuals or groups will purchase at various possible prices, other
things being constant
◉ The Law of Demand. Answer: quantity demanded is inversely
related to price. If the price of x increases, the quantity demanded
decreases.
◉ substitution effect. Answer: When the relative price (opportunity
cost) of a good or service rises, people seek substitutes for it, so the
quantity demanded of the good or service decreases.
◉ income effect. Answer: When the price of a good or service rises
relative to income, people cannot afford all the things they
previously bought, so the quantity demanded of the good or service
decreases.
◉ normal good. Answer: a good that consumers demand more of
when their incomes increase
◉ inferior good. Answer: a good for which, other things equal, an
increase in income leads to a decrease in demand
PAPER 2026 SOLUTIONS VERIFIED
◉ decreasing marginal benefit. Answer: the maximum amount of
money a consumer is willing to pay for an additional good or service
is decreasing.
◉ production efficiency. Answer: we cannot produce additional
amounts of a good without decreasing the production amount of
another product
◉ allocative efficiency. Answer: every good or service is produced up
to the point where the last unit provides a marginal benefit to
consumers equal to the marginal cost of producing
◉ inefficiency. Answer: any point inside the PPC
◉ comparative advantage. Answer: the ability to produce a good at a
lower opportunity cost than another producer
◉ absolute advantage. Answer: producing a greater quantity of a
good, or service than competitors, using the same amount of
resources.
,◉ Specialization. Answer: put all production into one good or
service
◉ economic growth. Answer: what does a shifting out of the PPC
represent?
◉ consumer goods. Answer: goods produced for personal
satisfaction
◉ capital goods. Answer: goods used to produce other goods
◉ per-worker production function. Answer: used to illustrate long
run economic growth using the factors of production along with
other variables, such as technology.
◉ law of diminishing returns. Answer: A decrease in a firm's
marginal output from adding an additional unit of input.
◉ market. Answer: arrangements (or location) that individuals have
for exchanging with one another.
◉ markets & prices. Answer: an economic system that allocates
resources based on relative prices determined by supply and
demand
, ◉ demand. Answer: quantities of specific goods or services that
individuals or groups will purchase at various possible prices, other
things being constant
◉ The Law of Demand. Answer: quantity demanded is inversely
related to price. If the price of x increases, the quantity demanded
decreases.
◉ substitution effect. Answer: When the relative price (opportunity
cost) of a good or service rises, people seek substitutes for it, so the
quantity demanded of the good or service decreases.
◉ income effect. Answer: When the price of a good or service rises
relative to income, people cannot afford all the things they
previously bought, so the quantity demanded of the good or service
decreases.
◉ normal good. Answer: a good that consumers demand more of
when their incomes increase
◉ inferior good. Answer: a good for which, other things equal, an
increase in income leads to a decrease in demand
