Exam (elaborations)
ECO 201 Exam Detailed Questions and Expert Answers
- Course
- ECO 201
- Institution
- Southern New Hampshire University
ECO 201 Exam Detailed Questions and Expert Answers
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ECO 201 Exam Detailed Questions and ExpertAnswers
Economics - ANS the study of the choices that individuals make given the presence
of scarcity
scarcity - ANS limited resources but unlimited wants
types of resources (a.k.a. factors of production) - ANS 1. land: natural resources
2. nonhuman and animal resources: leather, meat, fur
3. labor: human capital (physical and mental)
4. capital: resources produced using land and labor to make other things
5. technology: always changing, but still scarce
6. entrepreneurial ability: knowledge/willingness to take a chance to make things
happen
*these are combined to produce commodities: economic goods and services*
the ten (eight) principles of economics - ANS 1. people face trade-offs: scarcity
forces us to make choices
2. the cost of something is what you give up to get it
3. rational people weigh costs and benefits and think and the margin
4. people respond to incentives (in predictable ways)
5. trade can make everyone better off
,6. markets are usually a good way to organize economic activity
7. governments can sometimes improve market outcomes
8. a country's standard of living depends on its ability to produce goods and
services
opportunity cost - ANS highest value benefit forgone due to choosing an
alternative
the three economic questions - ANS 1. what and how much to produce?
2. how to produce?
3. for whom to produce?
the economy - ANS the institutional structure through which individuals in a
society coordinate their diverse wants
efficiency - ANS the property of society getting the most it can from its scarce
resources (size of the economic pie)
equality - ANS the property of distributing economic prosperity uniformly among
the members of society (how the economic pie is sliced)
sunk cost - ANS a cost that has already been incurred and cannot be recovered
economically rational - ANS it is rational if you weigh the costs and benefits
, marginal thinking - ANS requires decision-makers to evaluate whether the benefit
of one more unit of something is greater than its cost
marginal analysis - ANS analysis that involves comparing marginal benefits and
marginal costs
the economic decision rule - ANS if the marginal benefit is greater than the
marginal cost do it
we do things to the point where...? - ANS marginal benefit=marginal cost
five facts about trade - ANS 1. trade is not a zero-sum game
2. by channeling goods and resources to those who value them most, *trade
creates value* and increases the wealth created by society's resources
3. transaction costs can inhibit trade
4. the middleman reduces costs
5. as trade restrictions are lifted, more value is created from trade
not a zero-sum game - ANS when individuals engage in a voluntary exchange, both
parties are made better off
transaction cost - ANS the time and effort needed to search out, negotiate, and
complete an exchange
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