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ECON 201 EXAM 1 BALL STATE | Questions And Answers Latest {} A+ Graded | 100% Verified
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ECON 201 EXAM 1 BALL STATE | Questions And Answers Latest {} A+ Graded | 100% Verified
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ECON 201 EXAM 1 BALL STATE | Questions And Answers Latest {2024- 2025} A+Graded | 100% Verified
What is Economics? - the study of how people and society manages its scarce resources. How people
make everyday decisions, purchases, savings, etc.
What is the difference between microeconomics and macroeconomics? - 1. Micro - the study of how
households and firms make decisions and how they interact in specific markets.
2. Macro - the study of economy-wide phenomena
What points on the PPF are inefficient? - Inefficient points are INSIDE the PPF; because you are not
producing as much as you can.
What points on the PPF are efficient? - Efficient points are ON the PPF; because you are producing as
much as possible. All resources are in use. It is impossible to make any more of the good without giving
up on some other.
What points on the PPF are unattainable? - Unattainable points are OUTSIDE the PPF; there are not
enough resources to produce this quantity. Only possible way to obtain this point is with trade.
What does it mean when the PPF shifts out/in in a parallel vs. non-parallel fashion? - 1. A change in
resources shifts the position of the PPF out/in in a parallel fashion.
2. A change in technology will shift the position of the PPF out in a parallel fashion.
3. A change in the opportunity cost will cause the PPF to be nonlinear and "bow outward." The law of
increasing relative cost; meaning the opportunity cost increase, meaning as we produce more of good A,
we have to give up increasingly larger amounts of good B.
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1. Parallel line - straight line PPF; constant opportunity cost, resources are equally suited for production
of either good.
2. Non-parallel - bowed out PPF; INCREASING opportunity cost, resources are specialized.
, Know how to determine how much of one good a country can produce if it is producing a certain
amount of the other good. - Producing x amount of one unit you lose out on producing x amount of the
other unit.
Know how to calculate the opportunity cost of producing a good from a PPF graph or table. - Rise over
run; ex: producing one less train you can produce 3 more drums.
How can PPF and opportunity cost determine whether an economic entities has a comparative vs.
absolute advantage in producing a good? - 1. Comparative Advantage - the ability to produce the good
at a lower opportunity cost than another person.
2. Absolute Advantage - the ability to produce a good using fewer inputs than another producer.
Know how to determine what entity should specialize the production of what good in trade. - Whoever
has the comparative advantage should produce that good. If two producers produce only the good they
have the comparative advantage in, and then decide to trade, they will both have more than they could
producing both alone.
What is a competitive market? - Has many buyers and sellers, all of which have a negligent effect on
price.
What is the supply curve and what does it represent? - 1. Supply curve is the producer will supply at a
certain price.
2. It represents the cost.
What is the demand curve and what does it represent? - 1. Demand curve is the consumer demands at
certain price.
2. It represents the willingness to pay.
What is the equilibrium in the market? - The equilibrium is where the price and quantity is equal; S=D.
The equilibrium point is the most efficient price sold in the market. Produce any more and you will have
a surplus, produce any less and you will have a shortage.
Know how to calculate a surplus or shortage in a market. - Information
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