ECON 1100- Chapter 1 Exam Questions and Answers Fully Solved Latest 2025-2026
Economics - Answers a social science that studies how choices are made and the consequences of those
choices
Economy - Answers refers to all the decisions, or choices, made by economic agents within a given
geographic area that involve the use of scarce resources
Economic System - Answers the way a society is organized to decide what outputs to produce and to
decide who gets to consume those outputs
Microeconomics - Answers studies the individual parts of the economy: the households, the firms, the
markets, and the various organizations that exist within the economy; the main focus is the behavior of
consumers (buyers) and producers (sellers) on their market activity and the production and pricing
decisions of firms
Macroeconomics - Answers uses measures of total economic activity, or economic aggregates, such as
gross domestic product, inflation, and the national unemployment rate to gauge the performance of the
overall economy; main focus is the economy as a whole
Positive Economics - Answers uses factual information and economic analysis to identify what is without
making a value judgment; looks at a situation, often using information both past and present to assess
the situation without evaluating it as, for example, good or bad
Normative Economics - Answers evaluates a situation with respect to what should be which requires a
value judgment; takes a subjective approach to a situation and attempts to classify it as good or bad,
desirable or undesirable, right or wrong
Positive Microeconomics- example - Answers "People are likely to buy more new cars if the price of new
cars fall substantially."
Positive Macroeconomics- example - Answers "The unemployment rate increases when the economy is
in a recession."
Normative Microeconomics- examples - Answers "Parking on college campuses should be free for
students enrolled in college."
Normative Macroeconomics- examples - Answers "Raising taxes on corporations and wealthy individuals
is the best way to balance the federal budget."
Scarcity - Answers the basic economic problem that forces all societies to decide:
-what outputs to produce
-how to produce the outputs
, -who ultimately gets to consume the outputs
Scarce Resources - Answers -land (natural resources)
-labor
-capital
-entrepreneurship
Scarce Resource- Land - Answers encompasses all gifts of nature, including land and other resources
such as timber, water, minerals, and climate
Scarce Resource- Labor - Answers the human effort applied to the production process. Production is
defined as the transformation of inputs into outputs and can mean a lot of different types of activity
such as transforming a piece of lumber into a bookshelf or moving crates of lettuce from the field to the
grocery store
Scarce Resource- Capital - Answers refers to the equipment and buildings used in production such as the
factories, the machines, the computers, and the delivery trucks that have been produced in the past,
which can be used to produce goods and provide services in the present and in the future
Scarce Resource- Entrepreneurship - Answers the ability to combine inputs to produce an output, which
requires innovating and risk-taking
Opportunity Cost - Answers the value of the best alternative foregone when a choice is made
Opportunity Cost- example - Answers The opportunity cost to Lottie is taking an hour walk instead of
taking an hour nap is:
a) zero because walks and naps are both free
b) the combined value of all of the other activities that Lottie might be doing during the hour she is on
the walk.
***c) the value of the nap that Lottie gives up to take the walk.
d) dependent on the hourly wage rate at Lottie's job, if she has one.
Fallacy of False Cause - Answers the incorrect assumption that one event causes another because the
two events tend to occur together
Fallacy of Composition - Answers arises when it is erroneously assumed that if something is true for a
part, it must also be true for the whole
Fallacy of Division - Answers the mistaken idea that what is good or true for the whole must also be
good for the parts of the whole
Economics - Answers a social science that studies how choices are made and the consequences of those
choices
Economy - Answers refers to all the decisions, or choices, made by economic agents within a given
geographic area that involve the use of scarce resources
Economic System - Answers the way a society is organized to decide what outputs to produce and to
decide who gets to consume those outputs
Microeconomics - Answers studies the individual parts of the economy: the households, the firms, the
markets, and the various organizations that exist within the economy; the main focus is the behavior of
consumers (buyers) and producers (sellers) on their market activity and the production and pricing
decisions of firms
Macroeconomics - Answers uses measures of total economic activity, or economic aggregates, such as
gross domestic product, inflation, and the national unemployment rate to gauge the performance of the
overall economy; main focus is the economy as a whole
Positive Economics - Answers uses factual information and economic analysis to identify what is without
making a value judgment; looks at a situation, often using information both past and present to assess
the situation without evaluating it as, for example, good or bad
Normative Economics - Answers evaluates a situation with respect to what should be which requires a
value judgment; takes a subjective approach to a situation and attempts to classify it as good or bad,
desirable or undesirable, right or wrong
Positive Microeconomics- example - Answers "People are likely to buy more new cars if the price of new
cars fall substantially."
Positive Macroeconomics- example - Answers "The unemployment rate increases when the economy is
in a recession."
Normative Microeconomics- examples - Answers "Parking on college campuses should be free for
students enrolled in college."
Normative Macroeconomics- examples - Answers "Raising taxes on corporations and wealthy individuals
is the best way to balance the federal budget."
Scarcity - Answers the basic economic problem that forces all societies to decide:
-what outputs to produce
-how to produce the outputs
, -who ultimately gets to consume the outputs
Scarce Resources - Answers -land (natural resources)
-labor
-capital
-entrepreneurship
Scarce Resource- Land - Answers encompasses all gifts of nature, including land and other resources
such as timber, water, minerals, and climate
Scarce Resource- Labor - Answers the human effort applied to the production process. Production is
defined as the transformation of inputs into outputs and can mean a lot of different types of activity
such as transforming a piece of lumber into a bookshelf or moving crates of lettuce from the field to the
grocery store
Scarce Resource- Capital - Answers refers to the equipment and buildings used in production such as the
factories, the machines, the computers, and the delivery trucks that have been produced in the past,
which can be used to produce goods and provide services in the present and in the future
Scarce Resource- Entrepreneurship - Answers the ability to combine inputs to produce an output, which
requires innovating and risk-taking
Opportunity Cost - Answers the value of the best alternative foregone when a choice is made
Opportunity Cost- example - Answers The opportunity cost to Lottie is taking an hour walk instead of
taking an hour nap is:
a) zero because walks and naps are both free
b) the combined value of all of the other activities that Lottie might be doing during the hour she is on
the walk.
***c) the value of the nap that Lottie gives up to take the walk.
d) dependent on the hourly wage rate at Lottie's job, if she has one.
Fallacy of False Cause - Answers the incorrect assumption that one event causes another because the
two events tend to occur together
Fallacy of Composition - Answers arises when it is erroneously assumed that if something is true for a
part, it must also be true for the whole
Fallacy of Division - Answers the mistaken idea that what is good or true for the whole must also be
good for the parts of the whole
