Economics 2305 Final TTU Questions With All Correct Answers!!

Economics - Answer-social science that studies the choices that individuals, businesses, governments, and societies make as they cope with scarcity, incentives, and reconcile those choices Macroeconomics - Answer-Study of the performance of the national and global economies E.x. Why is the unemployment rate in the U.S. so high? Microeconomics - Answer-Study of choices that individuals and businesses make, the way those choices interact in markets, and the influence of governments E.x. Why are the people buying more e-books and fewer hard copy books? 6 Principles of Economic Thinking - Answer-1. Choices are a trade-off 2. People make rational decisions by comparing benefits and costs 3. Benefits is what you gain from something 4. Cost is what you must give up to get something 5.Most choices are "how much" choices made at margin 6. Choices respond to incentives Choice is a trade-off - Answer-Someone must give something up to get something else People make rational decisions by comparing benefits and costs - Answer-The most important thing about individuals choices is the wants of a person and the benefit of something must exceed the cost Benefit is what you gain from something - Answer-determined by preference Cost is what you must give up to get something - Answer-Opportunity Cost is the highest valued alternative that must be given to get something else Most choices are "how much" choices made at the margin - Answer-Evaluates the consequences of making incremental changes in the use of your time Compares the benefit a little above the costChoices respond to incentives - Answer-Predict how choices change by looking at changing incentives Positive Statements - Answer-Statements that can be tested by checking it against facts Normative Statements - Answer-Statements that express an opinion and cannot be tested Production Possibilities Frontier (PPF) - Answer-boundary between those combinations of Goods and Services that can be produced and those that cannot illustrated by focusing on 2 goods at a time while other goods are constant Important Aspects of the PPF - Answer-Points on the PPF= efficient and attainable Points outside the PPF= unattainable points inside the PPF= inefficient and unattainable Production Efficiency - Answer-When we cannot produce more of one good without producing less of some other good Allocative Efficiency - Answer-When we cannot produce one more of any good without giving up some other good that we value more highly Producing at a point on the PPF that we prefer above all other points Competitive Markets - Answer-A market that has many buyers and many sellers so no single buyer/seller can influence the price Quantity Demanded - Answer-The amount that consumers plan to buy during a particular time, period, and at a particular price Law of Demand - Answer-Other things remaining the same, the higher the price of a good, the smaller is the quantity demanded; the lower the price of a good the larger the quantity demanded A change in the price may affect the change in the quantity demanded because of the substitution effect and income effectSubstitution Effect - Answer-When the relative price (opportunity cost) of a good/service rises, people seek substitutes for it, so the quantity demanded of the good and service decreases Income Effect - Answer-When the price of a good/service rises relative to income, people cannot afford all the things they previously bought, so the quantity demanded of the good/services decreases Law of Supply - Answer-Other things remaining the same, the higher the price of a good, the greater is the quantity supplied; and the lower the price of a good, the smaller is the quantity supplied