ECN 101 Final Exam Study Guide 2026 | Economics Review, Practice Questions &
Test Prep
What is economics? - ANS ✔✔The study of how individuals and societies manage scarce
resources
What is the definition of elasticity? - ANS ✔✔A measure of how buyers or sellers respond to
changing market conditions
What is the equation for profit? - ANS ✔✔Total Revenue - Total Cost
Why is scarcity the fundamental concept of economics? - ANS ✔✔Scarcity compels us to make
choices
What is Price Elasticity of Demand? - ANS ✔✔A measure of how the quantity demanded of a
good response to a change in its price
What is total revenue? What is the equation for total revenue? - ANS ✔✔The amount a firm
receives from the sale of its output. Price x Quantity
What is the difference between microeconomics and macroeconomics? - ANS
✔✔Microeconomics- studies the decision-making of individuals and firms and how these
decisions are coordinated in markets
Macroeconomics- studies economy-wide phenomenon such as aggregate production,
unemployment, and inflation
What is the basic formula of Price Elasticity of Demand? - ANS ✔✔Ep= |% change in QD| / |%
change in P|
,What is total cost? What is the equation for total cost? - ANS ✔✔The market value of the inputs
a firm uses in production. Explicit Costs + Implicit Costs
Fixed Cost + Variable Cost
Why do people face tradeoffs? - ANS ✔✔What must be given up when making a particular
choice
What is the midpoint formula? - ANS ✔✔|(Q2 - Q1/Qaverage)|/|(P2-P1/Paverage)|
What are explicit costs? - ANS ✔✔Input costs that require an outlay of money by the firm.
Example: paying wages to workers
What is the difference between equity and efficiency tradeoffs? - ANS ✔✔Equity (equality)-
property of distributing prosperity uniformly among members in society
Efficiency- property of getting the most it can from scarce resources
What are the determinants of Price elasticity of demand? How do they affect the price elasticity
of demand? - ANS ✔✔Necessity (medicine)- inelastic, Luxury (designer clothing)- elastic
Few substitutes (salt)- inelastic, Lots of substitutes (root beer)- elastic
Broad markets (food)- inelastic, Narrow markets (chips)- elastic
Short time horizon- inelastic, Long time horizon- elastic
What are implicit costs? - ANS ✔✔Input costs that do not require an outlay of money by the
firm. Example: the opportunity cost of the owner's time
What is opportunity cost? - ANS ✔✔Whatever must be given up when making a particular
choice
, What is elastic demand? - ANS ✔✔Quantity demanded is highly responsive to a price change
% change QD > % change P (Ep > 1)
What is accounting profit? - ANS ✔✔Total Revenue - Explicit Costs (ignores implicit costs)
What is economic profit? - ANS ✔✔Total Revenue - Total Cost (Explicit + Implicit)
What is inelastic demand? - ANS ✔✔Quantity demanded is less responsive to a price change
% change QD < % change P (Ep < 1)
What is the difference between explicit and implicit costs? - ANS ✔✔Explicit: costs that require
a cash outlay
Implicit: costs that do not require a cash outlay
What is sunk cost? - ANS ✔✔A cost that has already been committed and cannot be recovered
What is perfectly elastic demand? - ANS ✔✔Extreme response, Ep = infinity
What is production function? - ANS ✔✔The relationship between quantity of inputs used to
make a good and the quantity of output of that good
What do you include when calculating opportunity cost? - ANS ✔✔Include: Explicit and Implicit
costs
Don't Include: Sunk costs
What is perfectly inelastic demand? - ANS ✔✔No response, Ep = 0
Test Prep
What is economics? - ANS ✔✔The study of how individuals and societies manage scarce
resources
What is the definition of elasticity? - ANS ✔✔A measure of how buyers or sellers respond to
changing market conditions
What is the equation for profit? - ANS ✔✔Total Revenue - Total Cost
Why is scarcity the fundamental concept of economics? - ANS ✔✔Scarcity compels us to make
choices
What is Price Elasticity of Demand? - ANS ✔✔A measure of how the quantity demanded of a
good response to a change in its price
What is total revenue? What is the equation for total revenue? - ANS ✔✔The amount a firm
receives from the sale of its output. Price x Quantity
What is the difference between microeconomics and macroeconomics? - ANS
✔✔Microeconomics- studies the decision-making of individuals and firms and how these
decisions are coordinated in markets
Macroeconomics- studies economy-wide phenomenon such as aggregate production,
unemployment, and inflation
What is the basic formula of Price Elasticity of Demand? - ANS ✔✔Ep= |% change in QD| / |%
change in P|
,What is total cost? What is the equation for total cost? - ANS ✔✔The market value of the inputs
a firm uses in production. Explicit Costs + Implicit Costs
Fixed Cost + Variable Cost
Why do people face tradeoffs? - ANS ✔✔What must be given up when making a particular
choice
What is the midpoint formula? - ANS ✔✔|(Q2 - Q1/Qaverage)|/|(P2-P1/Paverage)|
What are explicit costs? - ANS ✔✔Input costs that require an outlay of money by the firm.
Example: paying wages to workers
What is the difference between equity and efficiency tradeoffs? - ANS ✔✔Equity (equality)-
property of distributing prosperity uniformly among members in society
Efficiency- property of getting the most it can from scarce resources
What are the determinants of Price elasticity of demand? How do they affect the price elasticity
of demand? - ANS ✔✔Necessity (medicine)- inelastic, Luxury (designer clothing)- elastic
Few substitutes (salt)- inelastic, Lots of substitutes (root beer)- elastic
Broad markets (food)- inelastic, Narrow markets (chips)- elastic
Short time horizon- inelastic, Long time horizon- elastic
What are implicit costs? - ANS ✔✔Input costs that do not require an outlay of money by the
firm. Example: the opportunity cost of the owner's time
What is opportunity cost? - ANS ✔✔Whatever must be given up when making a particular
choice
, What is elastic demand? - ANS ✔✔Quantity demanded is highly responsive to a price change
% change QD > % change P (Ep > 1)
What is accounting profit? - ANS ✔✔Total Revenue - Explicit Costs (ignores implicit costs)
What is economic profit? - ANS ✔✔Total Revenue - Total Cost (Explicit + Implicit)
What is inelastic demand? - ANS ✔✔Quantity demanded is less responsive to a price change
% change QD < % change P (Ep < 1)
What is the difference between explicit and implicit costs? - ANS ✔✔Explicit: costs that require
a cash outlay
Implicit: costs that do not require a cash outlay
What is sunk cost? - ANS ✔✔A cost that has already been committed and cannot be recovered
What is perfectly elastic demand? - ANS ✔✔Extreme response, Ep = infinity
What is production function? - ANS ✔✔The relationship between quantity of inputs used to
make a good and the quantity of output of that good
What do you include when calculating opportunity cost? - ANS ✔✔Include: Explicit and Implicit
costs
Don't Include: Sunk costs
What is perfectly inelastic demand? - ANS ✔✔No response, Ep = 0
