1
BSNS 113 MIDTERM EXAM NEWEST ACTUAL EXAM
WITH COMPLETE QUESTIONS AND CORRECT
VERIFIED ANSWERS (DETAILED ANSWERS)
ALREADY GRADED A+ 100% GUARANTEED TO
PASS CONCEPTS!!!
Scarcity - (answers)Not enough to satisfy everyone at zero price
Three basic questions that every economic system answers? - (answers)1. What to produce?
2. How to produce it?
3. For whom to produce?
Positive economics - (answers)When we describe and explain how an aspect of the economy works
Normative economics - (answers)When we make a statement about how things ought to change
(economists usually asked to do this in the context of public policy making)
What do economists model? - (answers)The effects of market forces. E.g. Competition among
businesses, the efforts of consumers to get the most from their budgets.
Economists build graphical and algebraic models as they are... - (answers)▪︎ Useful simplifications of
complex phenomenon.
▪︎ Useful simplifications of reality
▪︎ Real world outcomes can have complex causes, we can investigation something complex by
breaking it into simpler parts and then work to understand each part.
▪︎ Helps us explain interesting phenomena
What do economists study? - (answers)The systems 'societies' use, to allocate scarce resources, to
the production of goods and services, and to distribute these goods and services to consumers.
I.e. How societies manage the use of scarce resources.
, 2
Economic rationality - (answers)Early economists observed that people seem intent to set up
systems that work 'efficiently' i.e. they yield the greatest net benefit.
Our 'system' is a mix of several systems, what are they? - (answers)▪︎ Traditional - follow in the family
business, traditional practices in the home...
▪︎ Command (or planned)
◦ Authoritarian - owner/manager of a business or household
◦ Bureaucratic - large companies, local councils, central government (large complex organism)
▪︎ Market
◦ Farmers' market, supermarkets, George St, Trade-me
Important historic economists - (answers)▪︎ Adam Smith
▪︎ David Ricardo
▪︎ Robert Malthus
Production Possibilities Frontier (PPF) - (answers)A graph that shows the various combinations of
output that the economy can possibly produce given the available factors of production and the
available production technology.
Aspects of the production process - (answers)Fixed:
▪︎ A fixed level of production technology
▪︎ A fixed amount of 'plant and equipment'
All other aspects (i.e. inputs) are variable
Resources (A.K.A Factors of Production, Inputs) - (answers)▪︎ Natural resources (N) - land, air,
sunshine, minerals etc.
▪︎ Human resources (L) - Labour
▪︎ Produced resources (K) - aka 'capital' - machinery, expertise, intermediate inputs e.g. car paint and
body filler
, 3
Interpreting the PPF - (answers)▪︎ The curve is a production possibilities frontier (PPF)
▪︎ Can produce any output combination on the curve by altering the amount of resources spent on
each activity
▪︎ Doing more of one requires doing less of another
Interpreting the slope of the PPF - (answers)Q goods = f(Q services)
▪︎ All else held constant
Slope = (△Q goods)/(△Q services)
i.e. the opportunity cost of producing one more unit of services (goods).
Opportunity cost - (answers)The value of the next best activity foregone. (Whatever must be given
up to obtain some item).
▪︎ The slope of the PPF shows - the opportunity cost of allocating more resources to the alternative
good or service.
▪︎ Scarcity implies opportunity cost
◦ If a scarce resource is fully employed, choosing to do more of one thing has an opportunity cost:
less of another thing.
Production possibilities for a country assumptions - (answers)▪︎ One country
▪︎ Only two types of product: goods and services
▪︎ A time frame e.g. a year
▪︎ A fixed level or production technology
▪︎ A fixed level of productive resources, all of which are fully employed
▪︎ Resource heterogeneity - each type of resource varies in its characteristics relevant to production of
the two goods.
What happens when we increase production of services? - (answers)▪︎ Have to re-allocate resources
from Goods to Services
▪︎ First those most suited to service production relative to goods production
, 4
▪︎ At each step, remaining resources are less suited - takes more resources and therefore each
additional unit of services costs more in terms of goods foregone.
▪︎ Therefore, the PPF gets steeper as Services production increases.
▪︎ The 'marginal' opportunity cost increases
Interpretation of points on the PPF graph - (answers)▪︎ Points on the PPF
◦ combinations of goods and services with all resources fully and efficiently employed (Technically
efficient)
▪︎ Points in the area under.to the left of the frontier
◦ combinations of goods and services without fully employing all resources (Technically inefficient -
we could produce more goods and/or services with the same resources)
▪︎ Points in the area above/to the right of the frontier
◦ Combinations of goods and services unobtainable with the resources available
Absolute advantage - (answers)The ability to produce a good using fewer inputs than another
producer (or more goods using the same inputs).
Comparative advantage - (answers)The ability to produce a good at a lower opportunity cost than
another producer
What is a 'market'? - (answers)A group of buyers and sellers whose interactions determine the price
at which a good or services trades.
Why trade? - (answers)Because the productivity of resource varies:
1. across particular 'resource units'
◦ E.g. Agricultural productivity varies with climate
◦ Workers vary in their skills and interests
2. With the 'scale of production'
◦ Larger scale of production allows use of specialised inputs that reduce cost per unit of output.
BSNS 113 MIDTERM EXAM NEWEST ACTUAL EXAM
WITH COMPLETE QUESTIONS AND CORRECT
VERIFIED ANSWERS (DETAILED ANSWERS)
ALREADY GRADED A+ 100% GUARANTEED TO
PASS CONCEPTS!!!
Scarcity - (answers)Not enough to satisfy everyone at zero price
Three basic questions that every economic system answers? - (answers)1. What to produce?
2. How to produce it?
3. For whom to produce?
Positive economics - (answers)When we describe and explain how an aspect of the economy works
Normative economics - (answers)When we make a statement about how things ought to change
(economists usually asked to do this in the context of public policy making)
What do economists model? - (answers)The effects of market forces. E.g. Competition among
businesses, the efforts of consumers to get the most from their budgets.
Economists build graphical and algebraic models as they are... - (answers)▪︎ Useful simplifications of
complex phenomenon.
▪︎ Useful simplifications of reality
▪︎ Real world outcomes can have complex causes, we can investigation something complex by
breaking it into simpler parts and then work to understand each part.
▪︎ Helps us explain interesting phenomena
What do economists study? - (answers)The systems 'societies' use, to allocate scarce resources, to
the production of goods and services, and to distribute these goods and services to consumers.
I.e. How societies manage the use of scarce resources.
, 2
Economic rationality - (answers)Early economists observed that people seem intent to set up
systems that work 'efficiently' i.e. they yield the greatest net benefit.
Our 'system' is a mix of several systems, what are they? - (answers)▪︎ Traditional - follow in the family
business, traditional practices in the home...
▪︎ Command (or planned)
◦ Authoritarian - owner/manager of a business or household
◦ Bureaucratic - large companies, local councils, central government (large complex organism)
▪︎ Market
◦ Farmers' market, supermarkets, George St, Trade-me
Important historic economists - (answers)▪︎ Adam Smith
▪︎ David Ricardo
▪︎ Robert Malthus
Production Possibilities Frontier (PPF) - (answers)A graph that shows the various combinations of
output that the economy can possibly produce given the available factors of production and the
available production technology.
Aspects of the production process - (answers)Fixed:
▪︎ A fixed level of production technology
▪︎ A fixed amount of 'plant and equipment'
All other aspects (i.e. inputs) are variable
Resources (A.K.A Factors of Production, Inputs) - (answers)▪︎ Natural resources (N) - land, air,
sunshine, minerals etc.
▪︎ Human resources (L) - Labour
▪︎ Produced resources (K) - aka 'capital' - machinery, expertise, intermediate inputs e.g. car paint and
body filler
, 3
Interpreting the PPF - (answers)▪︎ The curve is a production possibilities frontier (PPF)
▪︎ Can produce any output combination on the curve by altering the amount of resources spent on
each activity
▪︎ Doing more of one requires doing less of another
Interpreting the slope of the PPF - (answers)Q goods = f(Q services)
▪︎ All else held constant
Slope = (△Q goods)/(△Q services)
i.e. the opportunity cost of producing one more unit of services (goods).
Opportunity cost - (answers)The value of the next best activity foregone. (Whatever must be given
up to obtain some item).
▪︎ The slope of the PPF shows - the opportunity cost of allocating more resources to the alternative
good or service.
▪︎ Scarcity implies opportunity cost
◦ If a scarce resource is fully employed, choosing to do more of one thing has an opportunity cost:
less of another thing.
Production possibilities for a country assumptions - (answers)▪︎ One country
▪︎ Only two types of product: goods and services
▪︎ A time frame e.g. a year
▪︎ A fixed level or production technology
▪︎ A fixed level of productive resources, all of which are fully employed
▪︎ Resource heterogeneity - each type of resource varies in its characteristics relevant to production of
the two goods.
What happens when we increase production of services? - (answers)▪︎ Have to re-allocate resources
from Goods to Services
▪︎ First those most suited to service production relative to goods production
, 4
▪︎ At each step, remaining resources are less suited - takes more resources and therefore each
additional unit of services costs more in terms of goods foregone.
▪︎ Therefore, the PPF gets steeper as Services production increases.
▪︎ The 'marginal' opportunity cost increases
Interpretation of points on the PPF graph - (answers)▪︎ Points on the PPF
◦ combinations of goods and services with all resources fully and efficiently employed (Technically
efficient)
▪︎ Points in the area under.to the left of the frontier
◦ combinations of goods and services without fully employing all resources (Technically inefficient -
we could produce more goods and/or services with the same resources)
▪︎ Points in the area above/to the right of the frontier
◦ Combinations of goods and services unobtainable with the resources available
Absolute advantage - (answers)The ability to produce a good using fewer inputs than another
producer (or more goods using the same inputs).
Comparative advantage - (answers)The ability to produce a good at a lower opportunity cost than
another producer
What is a 'market'? - (answers)A group of buyers and sellers whose interactions determine the price
at which a good or services trades.
Why trade? - (answers)Because the productivity of resource varies:
1. across particular 'resource units'
◦ E.g. Agricultural productivity varies with climate
◦ Workers vary in their skills and interests
2. With the 'scale of production'
◦ Larger scale of production allows use of specialised inputs that reduce cost per unit of output.
