ECN 211 COMPLETE EXAMINATION TEST
QUESTIONS WITH VERIFIED SOLUTIONS
●● 4 types of resources in economics
Answer: land, labor, capital (machinery), human capital (education)
●● what is resource scarcity
Answer: finite amount of a certain resource (oil, mineral, skill, labor)
●● what is a trade off
Answer: every thing you give up when making a decision
●● explain the opportunity cost of a decision
Answer: - the single best thing you give up for something else.
- all decisions have opportunity costs
●● what is an incentive
Answer: an opportunity to make yourself better off
●● what is the impact of incentives on markets
Answer: - people will exploit any and all incentives until fully exhausted
- the basis of all predictions by economists about individual behavior
,●● what is an economy
Answer: a system for coordinating the productive activities of many
people
●● what is a market economy
Answer: where coordination takes place without a coordinator, just
individual choice
●● what is interaction in economics
Answer: - each individuals choices depends on the choices made by
other people
●● what is critical to understand how market economy behaves
Answer: interaction in economics
●● what are the 4 principles of interaction
Answer: - gains from trade
- markets move to equilibrium
- resources should be used efficiently to achieve society goals
- gov. intervention can improve society's welfare
●● Why do opportunity costs increase
, Answer: some resources are more suited for producing one good than
another
●● what is a production possibility frontier
Answer: allows us to visualize trade offs using a simplified economy
that only sells two products
●● what does a PPF look like on a graph
Answer: A: feasible and efficient in production
B: not feasible
C: feasible but not efficient
●● how does a PPF curve change with economic growth
Answer: as an economy shifts resource/priorities, the PPF becomes more
bow-shaped
●● what makes a bow shaped PPF curve
Answer: if the opportunity cost of a good rises as more of the good is
produced
●● what makes a PPF linear
Answer: if the opportunity cost remains constant
QUESTIONS WITH VERIFIED SOLUTIONS
●● 4 types of resources in economics
Answer: land, labor, capital (machinery), human capital (education)
●● what is resource scarcity
Answer: finite amount of a certain resource (oil, mineral, skill, labor)
●● what is a trade off
Answer: every thing you give up when making a decision
●● explain the opportunity cost of a decision
Answer: - the single best thing you give up for something else.
- all decisions have opportunity costs
●● what is an incentive
Answer: an opportunity to make yourself better off
●● what is the impact of incentives on markets
Answer: - people will exploit any and all incentives until fully exhausted
- the basis of all predictions by economists about individual behavior
,●● what is an economy
Answer: a system for coordinating the productive activities of many
people
●● what is a market economy
Answer: where coordination takes place without a coordinator, just
individual choice
●● what is interaction in economics
Answer: - each individuals choices depends on the choices made by
other people
●● what is critical to understand how market economy behaves
Answer: interaction in economics
●● what are the 4 principles of interaction
Answer: - gains from trade
- markets move to equilibrium
- resources should be used efficiently to achieve society goals
- gov. intervention can improve society's welfare
●● Why do opportunity costs increase
, Answer: some resources are more suited for producing one good than
another
●● what is a production possibility frontier
Answer: allows us to visualize trade offs using a simplified economy
that only sells two products
●● what does a PPF look like on a graph
Answer: A: feasible and efficient in production
B: not feasible
C: feasible but not efficient
●● how does a PPF curve change with economic growth
Answer: as an economy shifts resource/priorities, the PPF becomes more
bow-shaped
●● what makes a bow shaped PPF curve
Answer: if the opportunity cost of a good rises as more of the good is
produced
●● what makes a PPF linear
Answer: if the opportunity cost remains constant
