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ECON 201 - Review Questions for Semester Exams With 100% SURE ANSWERS
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Terms in this set (253)
Economics - The social science concerned with the production, consumption, and
Define economics.
distribution/transfer of wealth.
Good - Tangible item/product
What is the difference between a good and a
service?
Service - Not tangible item/product (think doing something for something)
Positive Statement - Statements not slanted or biased in any way (states how something is)
What is the difference between a "positive"
statement and a "normative" statement? Normative Statement - Statements that are slanted or biased in any way (opinionated
statements)
We have an expert-written solution to this problem!
Theory - A proposal; what someone thinks expressed in words
Describe an economic model. How are theories Model - A simplified representation of a real situation that is used to better understand real-life
and models used in economics? situations. ex. mathematical, architectural, medical, etc.
Theories must be turned into models before testing them. (Theory => Model)
ECON 201 - Review Questions for Semester Exams
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, Ceteris Paribus - "Other things held constant, other things held equal"
What does "ceteris paribus" mean? How do
economists use ceteris paribus? Think of experiments where you have control variables and in a test you change only a single
or few variables at a time.
What is the difference between an endogenous Endogenous Variable - Variable inside an economic model
variable and an exogenous variable? Which of
these variables is "inside" our economic model? Exogenous Variable - Variable outside an economic model
Which of these variables is "outside" our
economic model?
Opportunity Cost - What is the cost of an item? What did you give up in order to
Define the term "opportunity cost."
choose/obtain some other thing? (What was the next best alternative?)
How is the "law of large numbers" used in Law of Large Numbers - A truth typically used to find an average of a sample. The larger the
macroeconomics? sample size, the truer the average.
What is the "fallacy of composition"? Fallacy of Composition - What is good for the individual might not be good for the group.
Marginal Analysis - The study of marginal decisions.
What is "marginal analysis" or saying that
economic decisions are made "on the margin"? Marginal Decision - Decision made at the margin of an activity about whether to do a bit more
or a bit less of that activity. (ex. adding or removing a single worker)
What is an economic incentive? Give an example Economic Incentive - Anything that offers rewards to people who change their behavior. (ex.
of an incentive. For the IRS, there are Incentives for individuals who own a residence; tax breaks for donations)
Economic Disincentive - Anything that offers penalties or costs to people who change their
What is an economic disincentive? Give an
behavior in order to discourage them. (ex. Extra taxes on tobacco, alcohol, gasoline; taxes in
example of a disincentive.
general)
ECON 201 - Review Questions for Semester Exams
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Macroeconomic Analysis - Large view looking at groups of the economy lumped together.
How does macroeconomic analysis differ from
microeconomic analysis? Microeconomic Analysis - Smaller view looking at economic groups and entities on a closer,
broken down scale.
Efficiency - Taking advantage of all opportunities available in order to make some people
better off in society without making other people worse off (no downside). This term is positive.
Define efficiency. Define equity. Which of these
is normative? Which is positive? Can these two
Equity - A condition in which everyone gets his or her fair share. This term is normative.
goals be reached simultaneously? Explain.
These two terms are often at odds and it's hard to reach these goals simultaneously.
1. Land (natural resource like water or precious metals found)
What are the four categories of factors of
production (also called "economic resources")? 2. Capital (physical resources which need to be created, like a factory or vehicle)
Give an example of each type of factor of
production (We are ignoring the book's category 3. Labor (anyone on the job who receives instructions of authority by someone above that
of "human capital" and have added the more person on the job)
traditional category of "entrepreneurship"
instead.). 4. Entrepreneur (Someone putting their money, time, and ideas upfront to own their own
business or dictate their labor and its conditions)
What is the difference between an entrepreneur see Card 15
and a laborer?
The set of production possibilities available to an economy using all factors of production and
What does the production possibilities frontier the best/most current technology.
(curve) represent?
On the curve is feasible and efficient.
What does "constant opportunity costs" mean? Constant Opportunity Cost - linear relationship of opportunity cost on ppf (it is constant)
Why is this first production possibilities frontier
drawn as a straight line? What do we know about The factors of production in this situation are perfectly adaptable.
the adaptability of factors of production in this
situation?
Increasing Opportunity Costs - describes how the opportunity cost on the ppf (negative slope
of the curve) is becoming more and more negative in slope.
What does "increasing opportunity costs" mean?
Why is this second production possibilities
The second PPF is concave to allow an increasing negative slope as production of product
frontier drawn concave (bowed toward the
shifts from one to another.
origin)? What do we know about the adaptability
of factors of production in this situation?
The factors of production in this situation are not perfectly adaptable. Capital stock and/or
ECON 201 - Review Questions
labor mayfor
haveSemester Exams
to be retrained or shifted around.
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