ECO 2023 Final Exam Questions with All
Correct Answers 2026-2027 Updated.
3 big economic questions - Answer 1. What: what and how much is produced?
2. How: how are goods and services produced?
3. Who: who will get the goods and services?
3 approaches to answering 3 big questions - Answer 1.Tradition approach: do what we've
always done.
2. Command approach: government planners answer the questions.
3. Market-based approach: let prices, property rights, and markets answer the questions. (works
best because it aligns the self-interest with the social interest)
Production Possibilites Frontier (PPF) - Answer Shows the maximum feasible combinations of
goods a society can produce, given current resources and technology
Points within the PPF - Answer attainable, but inefficient
Points outside the PPF - Answer unattainable
Points on the PPF - Answer Attainable, and production efficient. Only one combination is
allocatively efficient.
Why is PPF bowed outward? - Answer Because of the law of increasing opportunity cost.
Law of Increasing Opportunity Cost - Answer the opportunity cost of producing a good
increases as more of it is produced.
Opportunity Cost - Answer the next best alternative foregone (what is given up in exchange for
increasing something else)
Opportunity cost is always in terms of the other good - Answer If a factory produces burgers
and fries, the opportunity cost of producing more burgers is producing less fries.
Law of Demand - Answer states that quantity demanded falls as price rises.
Law of Supply - Answer states that quantity supplied rises as price rises.
, Increase in income for a normal good - Answer Demand curve shifts right
Decrease in income for an inferior good - Answer Demand curve shifts right
Increase in the price of a substitute - Answer Demand curve shifts right
Decrease in the price of a complement - Answer Demand curve shifts right
Favorable changes in preferences - Answer Demand curve shifts right
Increase in number of demanders - Answer Demand curve shifts right
Credit becomes easier to get - Answer Demand curve shifts right
Increase in expected future price (demand) - Answer Demand curve shifts right
Decrease in income for a normal good - Answer Demand curve shifts left
Increase in income for an inferior good - Answer Demand curve shifts left
Decrease in the price of a substitute - Answer Demand curve shifts left
Increase in the price of a complement - Answer Demand curve shifts left
Unfavorable changes in preferences - Answer Demand curve shifts left
Decrease in number of demanders - Answer Demand curve shifts left
Credit becomes harder to get - Answer Demand curve shifts left
Decrease in expected future price (demand) - Answer Demand curve shifts left
Decrease in costs - Answer Supply curve shifts right
Correct Answers 2026-2027 Updated.
3 big economic questions - Answer 1. What: what and how much is produced?
2. How: how are goods and services produced?
3. Who: who will get the goods and services?
3 approaches to answering 3 big questions - Answer 1.Tradition approach: do what we've
always done.
2. Command approach: government planners answer the questions.
3. Market-based approach: let prices, property rights, and markets answer the questions. (works
best because it aligns the self-interest with the social interest)
Production Possibilites Frontier (PPF) - Answer Shows the maximum feasible combinations of
goods a society can produce, given current resources and technology
Points within the PPF - Answer attainable, but inefficient
Points outside the PPF - Answer unattainable
Points on the PPF - Answer Attainable, and production efficient. Only one combination is
allocatively efficient.
Why is PPF bowed outward? - Answer Because of the law of increasing opportunity cost.
Law of Increasing Opportunity Cost - Answer the opportunity cost of producing a good
increases as more of it is produced.
Opportunity Cost - Answer the next best alternative foregone (what is given up in exchange for
increasing something else)
Opportunity cost is always in terms of the other good - Answer If a factory produces burgers
and fries, the opportunity cost of producing more burgers is producing less fries.
Law of Demand - Answer states that quantity demanded falls as price rises.
Law of Supply - Answer states that quantity supplied rises as price rises.
, Increase in income for a normal good - Answer Demand curve shifts right
Decrease in income for an inferior good - Answer Demand curve shifts right
Increase in the price of a substitute - Answer Demand curve shifts right
Decrease in the price of a complement - Answer Demand curve shifts right
Favorable changes in preferences - Answer Demand curve shifts right
Increase in number of demanders - Answer Demand curve shifts right
Credit becomes easier to get - Answer Demand curve shifts right
Increase in expected future price (demand) - Answer Demand curve shifts right
Decrease in income for a normal good - Answer Demand curve shifts left
Increase in income for an inferior good - Answer Demand curve shifts left
Decrease in the price of a substitute - Answer Demand curve shifts left
Increase in the price of a complement - Answer Demand curve shifts left
Unfavorable changes in preferences - Answer Demand curve shifts left
Decrease in number of demanders - Answer Demand curve shifts left
Credit becomes harder to get - Answer Demand curve shifts left
Decrease in expected future price (demand) - Answer Demand curve shifts left
Decrease in costs - Answer Supply curve shifts right
