ECON 3100 Midterm 1 Questions with Complete Solutions

Microeconomics Correct Answer-The study of the allocation of scarce resources. How individuals and firms make themselves as well off as possible in a world of scarcity and the consequences of those individual decisions for the markets and the entire economy. Trade-off Correct Answer-Which goods and services to produce, how to produce, and who gets the goods and services Market Correct Answer-An exchange mechanism that allows buyers to trade with sellers Model Correct Answer-A description of the relationship between two or more economic variables. Use these to predict how a change in one variable will affect another. Income threshold model Correct Answer-No one who has an income level below a particular threshold buys a particular consumer durable, such as a refrigerator or microwave. Everyone whose income is above a certain threshold buys that product. Theory Correct Answer-The development and use of a model to test hypotheses Hypothesis Correct Answer-A prediction about cause and effect