Econ 211 Unit 1 Exam Study All Answers Correct
Key Economic Concepts
1. Definition of Economics: - ️ Economics is the social science concerned with making optimal choices under conditions of
scarcity.
2. Economic Wants: - ️ Economic wants exceed society's productive capacity.
3. Scarc...
- ✔️ "There is no such thing as a free lunch" refers to opportunity cost.
5. Rational Self-Interest:
- ✔️ Decisions that will make customers better off, with the goal to maximize utility or satisfaction,
are based on rational self-interest.
6. Economic Principle:
- A well-tested economic theory is often called:
- - a prototype.
- - a hypothesis.
- - a principle.
- - an anomaly.
- ✔️ a principle.
7. Production Possibilities Curve (PPC):
, - When referring to the production possibilities curve, the movement from point c to b represents an
adjustment when the Soviet Union transitioned from peacetime to wartime during the Second World
War.
8. Economic Self-Interest:
- According to economists, economic self-interest:
- - has the same meaning as selfishness.
- - is usually self-defeating.
- - means that people never make wrong decisions.
- - is a reality that underlies economic behavior.
- ✔️ is a reality that underlies economic behavior.
9. Economic Theories:
- Economic theories:
- - are generalizations based on hypotheses tested and supported with observed facts.
- - are abstractions and therefore of no application to real situations.
- - are useless because they are not based on laboratory experimentation.
- - that are true for individual economic units are never true for the economy as a whole.
- ✔️ are generalizations based on hypotheses tested and supported with observed facts.
10. Budget Line:
- Any combination of goods lying outside of the budget line:
- - yields less utility than any point inside the budget line.
- - yields less utility than any point on the budget line.
- - implies that the consumer is not spending all of the consumer's income.
- - is unattainable, given the consumer's income.
- ✔️ is unattainable, given the consumer's income.
11. Positive Statement:
, - A positive statement is one that:
- - focuses on facts, descriptions, and theoretical relationships.
- - focuses on the best course of action and is based on value judgments.
- - is derived by deduction.
- - is derived by induction.
- ✔️ focuses on facts, descriptions, and theoretical relationships.
12. Unemployment on the PPC:
- The economy will experience unemployment if it produces at a point:
- ✔️ inside the curve.
13. Production Possibilities Curve (PPC) Definition:
- A production possibilities curve shows:
- ✔️ the maximum amounts of two goods that can be produced, assuming the full use of available
resources.
- combinations of capital and labor necessary to produce specific levels of output.
that people prefer one of the goods more than the other.
that resources are unlimited. ✔️the maximum amounts of two goods that can be produced, assuming
the full use of available resources
Microeconomics is concerned with
establishing an overall view of the operation of the economic system.
positive economics, but not normative economics.
a detailed examination of specific economic units that make up the economic system.
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