ECN 211 FINAL EXAM REVIEW PAPER 2026 FULL
QUESTIONS AND CORRECT ANSWERS
GRADED A+
◉ The United States has a comparative advantage in the production
of wheat and an absolute advantage in the production of both apples
and wheat relative to Canada. If the U.S. and Canada specialize and
trade, the U.S. should produce what. Answer: Wheat
◉ The law of the demand states that if price rises, quantity
demanded does what. Answer: Decreases
◉ We would expect demand for cars to increase if.... Answer: The
price of gasoline falls.
◉ As income increases, consumers purchase more cars. Cars what
type of good?. Answer: Normal goods
◉ Supply curves show the relationship between price and quantity
demanded. Assuming the law of supply holds, supply curves are
what?. Answer: Upward sloping
,◉ Which causes a leftward shift in the supply curve for apples?.
Answer: An increase in the price of labor
◉ An increase in the equilibrium price of coffee could be caused by.
Answer: A decrease in supply of coffee.
◉ What is Consumer surplus?. Answer: The amount a buyer is
willing to pay for a good less the amount the buyer actually pays.
◉ When is a market is efficient?. Answer: The sum of consumer and
producer surplus is maximized.
◉ What is Producer surplus?. Answer: The difference between the
price producers collect and the minimum price required to bring
goods to market.
◉ Rent control is an example of what?. Answer: A price ceiling
◉ A price ceiling on a coffee would likely cause what?. Answer: A
shortage of coffee
◉ What is minimum wage an example of?. Answer: A price floor
◉ In the labor market, suppliers of labor are. Answer: Households
,◉ T/F: A payroll tax on a firm will raise more revenue than an
income tax of the same amount on households.. Answer: FALSE
◉ T/F: If the government decides to impose a $1 tax on coffee, it
makes no difference if the government collect the tax from
producers or consumers.. Answer: TRUE
◉ T/F: The revenue collected by the government from a tax is not
considered part of total surplus.. Answer: FALSE
◉ T/F: If supply and demand are relatively inelastic, deadweight loss
greater than otherwise.. Answer: FALSE
◉ T/F: If tax rates are high enough, the government can increase
revenue by lowering the tax rate.. Answer: TRUE
◉ What are Investment expenditures?. Answer: Firm purchases of
capital goods and inventory.
◉ What does GDP include?. Answer: Government purchases of
equipment used to build roads.
, ◉ What measure of GDP is adjusted for changing prices?. Answer:
Real GDP
◉ What is the Real Interest Rate?. Answer: The nominal interest rate
minus the inflation rate.
◉ The inflation rate is measured as. Answer: The percent change in
a price index from one year to the next.
◉ What is true about the CPI?. Answer: The goods included in the
CPI ''basket'' are fixed over time.
◉ If the economy is assumed to be closed than what?. Answer: net
exports = 0
◉ What is Public Saving?. Answer: Tax revenue plus government
expenditures
◉ A budget surplus occurs when what happens?. Answer: Tax
revenue exceeds government expenditures.
◉ What is the primary driver of economic growth?. Answer:
Productivity
QUESTIONS AND CORRECT ANSWERS
GRADED A+
◉ The United States has a comparative advantage in the production
of wheat and an absolute advantage in the production of both apples
and wheat relative to Canada. If the U.S. and Canada specialize and
trade, the U.S. should produce what. Answer: Wheat
◉ The law of the demand states that if price rises, quantity
demanded does what. Answer: Decreases
◉ We would expect demand for cars to increase if.... Answer: The
price of gasoline falls.
◉ As income increases, consumers purchase more cars. Cars what
type of good?. Answer: Normal goods
◉ Supply curves show the relationship between price and quantity
demanded. Assuming the law of supply holds, supply curves are
what?. Answer: Upward sloping
,◉ Which causes a leftward shift in the supply curve for apples?.
Answer: An increase in the price of labor
◉ An increase in the equilibrium price of coffee could be caused by.
Answer: A decrease in supply of coffee.
◉ What is Consumer surplus?. Answer: The amount a buyer is
willing to pay for a good less the amount the buyer actually pays.
◉ When is a market is efficient?. Answer: The sum of consumer and
producer surplus is maximized.
◉ What is Producer surplus?. Answer: The difference between the
price producers collect and the minimum price required to bring
goods to market.
◉ Rent control is an example of what?. Answer: A price ceiling
◉ A price ceiling on a coffee would likely cause what?. Answer: A
shortage of coffee
◉ What is minimum wage an example of?. Answer: A price floor
◉ In the labor market, suppliers of labor are. Answer: Households
,◉ T/F: A payroll tax on a firm will raise more revenue than an
income tax of the same amount on households.. Answer: FALSE
◉ T/F: If the government decides to impose a $1 tax on coffee, it
makes no difference if the government collect the tax from
producers or consumers.. Answer: TRUE
◉ T/F: The revenue collected by the government from a tax is not
considered part of total surplus.. Answer: FALSE
◉ T/F: If supply and demand are relatively inelastic, deadweight loss
greater than otherwise.. Answer: FALSE
◉ T/F: If tax rates are high enough, the government can increase
revenue by lowering the tax rate.. Answer: TRUE
◉ What are Investment expenditures?. Answer: Firm purchases of
capital goods and inventory.
◉ What does GDP include?. Answer: Government purchases of
equipment used to build roads.
, ◉ What measure of GDP is adjusted for changing prices?. Answer:
Real GDP
◉ What is the Real Interest Rate?. Answer: The nominal interest rate
minus the inflation rate.
◉ The inflation rate is measured as. Answer: The percent change in
a price index from one year to the next.
◉ What is true about the CPI?. Answer: The goods included in the
CPI ''basket'' are fixed over time.
◉ If the economy is assumed to be closed than what?. Answer: net
exports = 0
◉ What is Public Saving?. Answer: Tax revenue plus government
expenditures
◉ A budget surplus occurs when what happens?. Answer: Tax
revenue exceeds government expenditures.
◉ What is the primary driver of economic growth?. Answer:
Productivity
