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Econ 202 Exam 1 questions with complete solutions rated A+
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Econ 202 Exam 1 questions with complete solutions rated A+
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Econ 202 Exam 1 questions withcomplete solutions rated A+
Scarcity - correct answer ✔✔the economic problem of having limited resources to satisfy unlimited
wants
Trade-Offs - correct answer ✔✔Result from scarcity. Comparing benefits and costs of engaging in an
activity. Faced by everybody
Economics - correct answer ✔✔A way of thinking. The study of choices and decisions under scarcity
Cost Benefit Principle - correct answer ✔✔decisions should only be pursued if benefits are greater than
the costs.
Opportunity Cost Principle - correct answer ✔✔the value of the next best option that you give up. Ask
"Or what" There is ALWAYS an opp cost
Sunk Costs - correct answer ✔✔something already paid that you can't get back (will have to be paid in
both decision). Costs that are irrelevant and should be ignored in current decision
What do the cost benefit and opp cost principles say together - correct answer ✔✔pursue a choice if it
yields benefits at least as large as the opportunity cost
Marginal Principle - correct answer ✔✔Should I do one more. Says you should do/hire one more if
MB>MC
Marginal cost - correct answer ✔✔additional cost incurred by next unit (TC2-TC1)
Marginal Benefit - correct answer ✔✔additional benefit incurred by next unit (TB2-TB1)
, Interdependence principle - correct answer ✔✔choices depend on your other choices, choices made by
other within the same market, choices made between different markets, and choices made over time
What does the demand curve show - correct answer ✔✔the quantity of an item that someone (or a
market) is planning to buy at each price
shows willingness to pay for a given quantity and is a marginal benefit curve
Quantity Demanded - correct answer ✔✔the amount of a good that a person is willing to buy at a
particular price
What causes movement along a demand curve - correct answer ✔✔a change in the items price
What causes a shift in the demand curve - correct answer ✔✔-changes in income
-changes in preferences
-changes in related goods
-changes in the size of the market
-changes in expectations about the future
Normal goods - correct answer ✔✔demand increases when income rises
Inferior goods - correct answer ✔✔demand decreases as income rises
Price elasticity of demand - correct answer ✔✔how responsive quantity demanded is to a change in the
price
Why is elasticity used - correct answer ✔✔elasticity gives common percent changes, making
comparisons easy as demand curves are all in different units
Elastic, unitary elastic, inelastc - correct answer ✔✔-Elastic : PE>1, large change in q from small change
in p
-Unitary : PE = 1, no change
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