ECON 110 EXAM 1 KSU QUESTIONS
WITH CORRECT ANSWERS 2026/2027
The production possibility model can be used to demonstrate the concept of opportunity cost -
CORRECT ANSWER -True
Governments establish the laws that regulate the interaction between businesses and
households but do not serve as actors in the economy themselves - CORRECT ANSWER -False
An increase in demand causes equilibrium price and quality to rise, other things constant -
CORRECT ANSWER -True
The opportunity cost of undertaking an activity includes any sunk cost - CORRECT ANSWER -
False
Only marginal costs, not sunk costs, affect economic decisions if individuals are rational -
CORRECT ANSWER -True
When quantity demanded is greater than quantity supplied, the resulting shortage causes the
price to fall - CORRECT ANSWER -False
Deciding what the distribution of income should be is an example of normative economics -
CORRECT ANSWER -True
Two nations with differing comparative advantages will be able to consume more if each
produces the good for which the opportunity cost is highest and trades for the good for which
opportunity cost is the lowest - CORRECT ANSWER -False
, The law of supply states that more of a good will be supplied the lower its price, other things
constant - CORRECT ANSWER -False
In a Market economy, Society relies on the self-interest of individuals to determine what, how,
and for whom to produce - CORRECT ANSWER -True
Propositions that are logically true based on the assumptions of a model are known as: -
CORRECT ANSWER -Theorems
If you move from a point inside the productions possibility curve to a point on the productuon
possibility curve, it follows that efficiency is: - CORRECT ANSWER -Increased because the
economy Is now on the production Possibility curve
If there is a direct relationship between two variables, the graph relating those two variables
will be - CORRECT ANSWER -Upward-sloping
Macroeconomics includes the study of - CORRECT ANSWER -Inflation
Which of the following statements is correct - CORRECT ANSWER -Both stocks and bonds are
financially assets
A public good is a good that - CORRECT ANSWER -When consumed by one individual, can still be
consumes by others
Which of the shifts explains what will happen to the production possibility curve if political
unrest and strikes disrupt all sectors of an economy equally? (GRAPH PICTURED) - CORRECT
ANSWER -IV
WITH CORRECT ANSWERS 2026/2027
The production possibility model can be used to demonstrate the concept of opportunity cost -
CORRECT ANSWER -True
Governments establish the laws that regulate the interaction between businesses and
households but do not serve as actors in the economy themselves - CORRECT ANSWER -False
An increase in demand causes equilibrium price and quality to rise, other things constant -
CORRECT ANSWER -True
The opportunity cost of undertaking an activity includes any sunk cost - CORRECT ANSWER -
False
Only marginal costs, not sunk costs, affect economic decisions if individuals are rational -
CORRECT ANSWER -True
When quantity demanded is greater than quantity supplied, the resulting shortage causes the
price to fall - CORRECT ANSWER -False
Deciding what the distribution of income should be is an example of normative economics -
CORRECT ANSWER -True
Two nations with differing comparative advantages will be able to consume more if each
produces the good for which the opportunity cost is highest and trades for the good for which
opportunity cost is the lowest - CORRECT ANSWER -False
, The law of supply states that more of a good will be supplied the lower its price, other things
constant - CORRECT ANSWER -False
In a Market economy, Society relies on the self-interest of individuals to determine what, how,
and for whom to produce - CORRECT ANSWER -True
Propositions that are logically true based on the assumptions of a model are known as: -
CORRECT ANSWER -Theorems
If you move from a point inside the productions possibility curve to a point on the productuon
possibility curve, it follows that efficiency is: - CORRECT ANSWER -Increased because the
economy Is now on the production Possibility curve
If there is a direct relationship between two variables, the graph relating those two variables
will be - CORRECT ANSWER -Upward-sloping
Macroeconomics includes the study of - CORRECT ANSWER -Inflation
Which of the following statements is correct - CORRECT ANSWER -Both stocks and bonds are
financially assets
A public good is a good that - CORRECT ANSWER -When consumed by one individual, can still be
consumes by others
Which of the shifts explains what will happen to the production possibility curve if political
unrest and strikes disrupt all sectors of an economy equally? (GRAPH PICTURED) - CORRECT
ANSWER -IV
