Econ 101 Exam Questions and
Answers 100% Pass
Economists play two roles: - CORRECT ANSWER-1. Scientists: try to explain the
world
2. Policy advisors: try to improve it
Model: - CORRECT ANSWER-a highly simplified representation of a more
complicated reality. Economists use models to study economic issues.
Examples of Models - CORRECT ANSWER-Road Map, Model of Human in
A&P, Model Airplane
The Circular-Flow Diagram:
Two types of actors?
Two types of Markets? - CORRECT ANSWER-a visual model of the economy,
shows how dollars flow through markets among households and firms
Actors: Households & Firms
Markets: Market for goods and service. Market for factors of production.
,Factors of production: - CORRECT ANSWER-the resources the economy uses to
produce goods & services, including
labor
land
capital (buildings and machines used in production)
Firms: - CORRECT ANSWER-Buy/hire factors of production, use them to
produce goods and services
Sell goods & services
Households: - CORRECT ANSWER-Own the factors of production, sell/rent
them to firms for income
Buy and consume goods & services
The Circular flow Diagram - CORRECT ANSWER-
The Production Possibilities Frontier (PPF): - CORRECT ANSWER-a graph that
shows the combinations of two goods the economy can possibly produce given the
available resources and the available technology
Example of PPF: 2 goods, one resource? - CORRECT ANSWER-Two goods:
computers and wheat
One resource: labor (measured in hours)
Economy has 50,000 labor hours per month available for production.
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, Producing one computer requires 100 hours labor.
Producing one ton of wheat requires 10 hours labor.
A. labor on all 50,000 computers, no labor on wheat=500 computers & no wheat
B. labor 40,000 computers, 10,00 wheat =400 computers & 1,000 wheat
The opportunity cost:
-What happens when you shift resources? - CORRECT ANSWER-of an item is
what must be given up to obtain that item.
Moving along a PPF involves shifting resources (e.g., labor) from the production
of one good to the other.
Society faces a tradeoff: Getting more of one good requires sacrificing some of the
other.
The slope of the PPF tells you the opportunity cost of one good in terms of the
other.
The slope of a line - CORRECT ANSWER-equals the "rise over the run," the
amount the line rises when you move to the right by one unit.
Answers 100% Pass
Economists play two roles: - CORRECT ANSWER-1. Scientists: try to explain the
world
2. Policy advisors: try to improve it
Model: - CORRECT ANSWER-a highly simplified representation of a more
complicated reality. Economists use models to study economic issues.
Examples of Models - CORRECT ANSWER-Road Map, Model of Human in
A&P, Model Airplane
The Circular-Flow Diagram:
Two types of actors?
Two types of Markets? - CORRECT ANSWER-a visual model of the economy,
shows how dollars flow through markets among households and firms
Actors: Households & Firms
Markets: Market for goods and service. Market for factors of production.
,Factors of production: - CORRECT ANSWER-the resources the economy uses to
produce goods & services, including
labor
land
capital (buildings and machines used in production)
Firms: - CORRECT ANSWER-Buy/hire factors of production, use them to
produce goods and services
Sell goods & services
Households: - CORRECT ANSWER-Own the factors of production, sell/rent
them to firms for income
Buy and consume goods & services
The Circular flow Diagram - CORRECT ANSWER-
The Production Possibilities Frontier (PPF): - CORRECT ANSWER-a graph that
shows the combinations of two goods the economy can possibly produce given the
available resources and the available technology
Example of PPF: 2 goods, one resource? - CORRECT ANSWER-Two goods:
computers and wheat
One resource: labor (measured in hours)
Economy has 50,000 labor hours per month available for production.
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED
, Producing one computer requires 100 hours labor.
Producing one ton of wheat requires 10 hours labor.
A. labor on all 50,000 computers, no labor on wheat=500 computers & no wheat
B. labor 40,000 computers, 10,00 wheat =400 computers & 1,000 wheat
The opportunity cost:
-What happens when you shift resources? - CORRECT ANSWER-of an item is
what must be given up to obtain that item.
Moving along a PPF involves shifting resources (e.g., labor) from the production
of one good to the other.
Society faces a tradeoff: Getting more of one good requires sacrificing some of the
other.
The slope of the PPF tells you the opportunity cost of one good in terms of the
other.
The slope of a line - CORRECT ANSWER-equals the "rise over the run," the
amount the line rises when you move to the right by one unit.
