ECN 211 Exam 1 UPDATED ACTUAL QUESTIONS AND CORRECT ANSWERS
Economics the study of how society manages its scarce resources
Macroeconomics the study of economy-wide phenomena (ex. the federal deficit, the rate of
unemployment and policies to improve our standard of living)
Microeconomics the study of how households and firms make decisions and how they interact in
markets
, Mixed Economies a system with free markets, but with some government intervention (ex. U.S.)
Scarcity there is not enough of something to go around for everyone to have as much as
they want of it at a zero price
Resources are scarce for economies and households
Property Rights the ability of an individual to own and exercise control over scarce resources
Efficiency society is getting the maximum benefits from its scarce resources or the size of
the economic pie
Equality that benefits are distributed uniformly among society's members or how the pie is
divided into individual slices
Productivity the amount of goods and services produced from each unit of labor input
Incentives something that induces a person to act or change a behavior
Cost money, time, activities, etc. you give up
Opportunity Cost whatever you give up to get something else
Marginal Benefit the benefit/revenue of producing an item or of a choice
Marginal Thinking if the benefits of your choice outway the cost of it
Marginal Cost the cost of producing an item or of a choice
Trade-offs -"There ain't no such thing as a free lunch."
-To get more of one thing we have to give up something else
-Guns and butter (defense or social programs)
Trade-off between equality and efficiency taxes and welfare make us more equal but reduce incentives for hard work,
lowering total output
Trade-off between inflation and unemployment an increase in the quantity of money stimulates spending, which raises both prices
and production
The increase in production requires more hiring, which reduces unemployment.
an increase in inflation tends to reduce unemployment, causing a trade-off
between inflation and unemployment.
Market Power when an individual or group has the power to substantially influence market
prices
Market Failure when the market fails to allocate resources efficiently
Market Economy an economic system where interaction of households and firms in markets
determines the allocation of resources
Economics the study of how society manages its scarce resources
Macroeconomics the study of economy-wide phenomena (ex. the federal deficit, the rate of
unemployment and policies to improve our standard of living)
Microeconomics the study of how households and firms make decisions and how they interact in
markets
, Mixed Economies a system with free markets, but with some government intervention (ex. U.S.)
Scarcity there is not enough of something to go around for everyone to have as much as
they want of it at a zero price
Resources are scarce for economies and households
Property Rights the ability of an individual to own and exercise control over scarce resources
Efficiency society is getting the maximum benefits from its scarce resources or the size of
the economic pie
Equality that benefits are distributed uniformly among society's members or how the pie is
divided into individual slices
Productivity the amount of goods and services produced from each unit of labor input
Incentives something that induces a person to act or change a behavior
Cost money, time, activities, etc. you give up
Opportunity Cost whatever you give up to get something else
Marginal Benefit the benefit/revenue of producing an item or of a choice
Marginal Thinking if the benefits of your choice outway the cost of it
Marginal Cost the cost of producing an item or of a choice
Trade-offs -"There ain't no such thing as a free lunch."
-To get more of one thing we have to give up something else
-Guns and butter (defense or social programs)
Trade-off between equality and efficiency taxes and welfare make us more equal but reduce incentives for hard work,
lowering total output
Trade-off between inflation and unemployment an increase in the quantity of money stimulates spending, which raises both prices
and production
The increase in production requires more hiring, which reduces unemployment.
an increase in inflation tends to reduce unemployment, causing a trade-off
between inflation and unemployment.
Market Power when an individual or group has the power to substantially influence market
prices
Market Failure when the market fails to allocate resources efficiently
Market Economy an economic system where interaction of households and firms in markets
determines the allocation of resources
