BE 301 Final Exam Questions with Verified Solutions Graded A+
normative statement - Answers statement which describes how the world should be
positive statement - Answers statement which describes the world as it is
coercion - Answers the practice of persuading someone to do something by using force or
threats
cooperation - Answers Behavior by two or more individuals that leads to mutual benefit
wo people or nations can both become better off through trade: - Answers as long as each of
them can produce some good using fewer inputs.
Which of the following economic thinkers was not associated with the "Marginal Revolution" of
the late 19th century. - Answers Karl Marx
A rational or purposive decision-maker is one who: - Answers chooses actions they believe will
help them achieve their goals.
True or False- Because a potato has a price expressed in dollars, its value is objective. -
Answers False- economic value is subjective
invisible hand - Answers A phrase coined by Adam Smith to describe the process that turns self-
directed gain into social and economic benefits for all
comparitive advantage - Answers The situation where someone can produce a good at lower
opportunity cost than someone else can
individual demand curve - Answers illustrates the relationship between quantity demanded and
price for an individual consumer- movements along the demand curve include substitution
effects and income effects
normal good - Answers a good that consumers demand more of when their incomes increase
Law of Demand - Answers lower quantities are demanded at high prices (and vice versa)
demand curve for entire market - Answers add the quantities demanded at each given price for
each individual buyer to find quantity demanded as a whole
increase in demand - Answers shifts curve up and right
decrease in demand - Answers shifts curve down and left
Changes in Price for Demand - Answers changes in price do NOT shift the demand curve
what shifts the demand curve - Answers population and demographics, incomes, prices of other
goods, tastes and preferences, expectations
, inferior good - Answers your demand increases as income increases (and vice versa)
substitute goods - Answers if an increase in the price of good y causes the demand for good x
to increase they are substitutes (taxi and subway rides)
complimentary goods - Answers if an increase in the price of good y causes the demand for
good x to decrease, they are complements (pb prices increase, bob demands less sammys,
demands less jelly and bread)
budget constraint - Answers the limited amount of income available to consumers to spend on
goods and services
nominal income - Answers income that is not adjusted for changes in purchasing power
real income - Answers income in constant dollars; nominal income adjusted for inflation
perfect competition - Answers the degree of competition in which there are many sellers in a
market and none is large enough to dictate the price of a product, free entry and exit, no
transportation/ transaction costs, perfect divisibility, perfect knowledge, absence of
externalities
short-run supply curve - Answers upward sloping portion of its marginal cost curve above the
minimum of its average variable costs, for each hypothetical price, quantity supplied will be
where marginal cost = market price (marginal revenue)
long-run supply curve - Answers firms are free to enter and exit market, shape depends on what
happens to the industries input costs as industry output increases
changes in supply - Answers changes in the price of a good do not shift the supply curve for that
good
decrease in supply - Answers a leftward shift of the supply curve
increase in supply - Answers a rightward shift of the supply curve
Supply Shifters - Answers number of firms, input prices, technology, expectations
Equilibrium - Answers A state of balance
equilibrium price - Answers the price that balances quantity supplied and quantity demanded
Comparative Statics - Answers the analysis of the way a market will respond to a change
Interventionism - Answers the government moves beyond its role of protecting private property
in the means of production to issuing explicit commands that cause factors of production to be
used differently
Which of the following is not an assumption usually made about a market modeled as perfectly
normative statement - Answers statement which describes how the world should be
positive statement - Answers statement which describes the world as it is
coercion - Answers the practice of persuading someone to do something by using force or
threats
cooperation - Answers Behavior by two or more individuals that leads to mutual benefit
wo people or nations can both become better off through trade: - Answers as long as each of
them can produce some good using fewer inputs.
Which of the following economic thinkers was not associated with the "Marginal Revolution" of
the late 19th century. - Answers Karl Marx
A rational or purposive decision-maker is one who: - Answers chooses actions they believe will
help them achieve their goals.
True or False- Because a potato has a price expressed in dollars, its value is objective. -
Answers False- economic value is subjective
invisible hand - Answers A phrase coined by Adam Smith to describe the process that turns self-
directed gain into social and economic benefits for all
comparitive advantage - Answers The situation where someone can produce a good at lower
opportunity cost than someone else can
individual demand curve - Answers illustrates the relationship between quantity demanded and
price for an individual consumer- movements along the demand curve include substitution
effects and income effects
normal good - Answers a good that consumers demand more of when their incomes increase
Law of Demand - Answers lower quantities are demanded at high prices (and vice versa)
demand curve for entire market - Answers add the quantities demanded at each given price for
each individual buyer to find quantity demanded as a whole
increase in demand - Answers shifts curve up and right
decrease in demand - Answers shifts curve down and left
Changes in Price for Demand - Answers changes in price do NOT shift the demand curve
what shifts the demand curve - Answers population and demographics, incomes, prices of other
goods, tastes and preferences, expectations
, inferior good - Answers your demand increases as income increases (and vice versa)
substitute goods - Answers if an increase in the price of good y causes the demand for good x
to increase they are substitutes (taxi and subway rides)
complimentary goods - Answers if an increase in the price of good y causes the demand for
good x to decrease, they are complements (pb prices increase, bob demands less sammys,
demands less jelly and bread)
budget constraint - Answers the limited amount of income available to consumers to spend on
goods and services
nominal income - Answers income that is not adjusted for changes in purchasing power
real income - Answers income in constant dollars; nominal income adjusted for inflation
perfect competition - Answers the degree of competition in which there are many sellers in a
market and none is large enough to dictate the price of a product, free entry and exit, no
transportation/ transaction costs, perfect divisibility, perfect knowledge, absence of
externalities
short-run supply curve - Answers upward sloping portion of its marginal cost curve above the
minimum of its average variable costs, for each hypothetical price, quantity supplied will be
where marginal cost = market price (marginal revenue)
long-run supply curve - Answers firms are free to enter and exit market, shape depends on what
happens to the industries input costs as industry output increases
changes in supply - Answers changes in the price of a good do not shift the supply curve for that
good
decrease in supply - Answers a leftward shift of the supply curve
increase in supply - Answers a rightward shift of the supply curve
Supply Shifters - Answers number of firms, input prices, technology, expectations
Equilibrium - Answers A state of balance
equilibrium price - Answers the price that balances quantity supplied and quantity demanded
Comparative Statics - Answers the analysis of the way a market will respond to a change
Interventionism - Answers the government moves beyond its role of protecting private property
in the means of production to issuing explicit commands that cause factors of production to be
used differently
Which of the following is not an assumption usually made about a market modeled as perfectly
