AREC 202 Exam Questions with Verified Solutions Latest update 2025
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Course
AREC 202
Institution
AREC 202
AREC 202 Exam Questions with Verified Solutions Latest update 2025
Comparative Advantage - Answers When a persons opportunity cost of preforming a task is lower than the other person's opportunity cost.
Absolute Advantage - Answers When a person can preform a task in less time than the other pers...
AREC 202 Exam Questions with Verified Solutions Latest update 2025
Comparative Advantage - Answers When a persons opportunity cost of preforming a task is lower than
the other person's opportunity cost.
Absolute Advantage - Answers When a person can preform a task in less time than the other person.
Sunk Cost - Answers A cost that is beyond recovery at the moment a decision must be made
Marginal Benefit - Answers Increases in total benefit that results from carrying out one additional unit of
an activity
Income Elasticity of Demand - Answers The percent change in quantity demanded from a 1% change in
income
Opportunity Cost - Answers The value of what must be forgone to undertake an activity
Production Possibilities Curve - Answers A graph that describes the max amount of one good that can be
produced for every possible level of production of the other good
Excess Demand - Answers The amount by which quantity demanded exceeds quantity supplied
Production - Answers A system that converts inputs into outputs
Microeconomics (Individual Market) - Answers The study of individual choice and it's implications for the
behavior of prices and quantities
Price Ceiling - Answers Maximum allowable price set by law to protect consumers
Macroeconomics (National) - Answers The study of the performance of national economics and the
policies that governments use to try to improve that performance
Price Floor - Answers Minimum allowable price set by law
Scarcity Principle - Answers People have unlimited wants and limited resources
Shifts in Demand - Answers When buyers are willing to buy more/less at each price
Technology - Answers Recipe for production
Short Run - Answers The period of time when at least one of the firms factors of production is fixed
Normal Profit - Answers Accounting profit - Economic profit
Utility - Answers The satisfaction people derive from consumption "Utils" (Units of Happiness)
Economic Rent - Answers The portion of a payment to a factor of production that exceeds the owners
reservation price
, Long Run - Answers The period of time I which all inputs are variable
Fixed Cost - Answers The sum of all production for fixed inputs
Variable Cost - Answers The sum of all production for variable inputs (TC=VC+FC)
Invisible Hand - Answers Often results in the most efficient allocation of resources, self-interested
Real Price - Answers The nominal price of a good relative to the average price of all other goods
Economic Surplus - Answers The benefit of taking an action minus it's costs
Implicit Costs - Answers The opportunity cost of the resources supplied by the firms owners
Allocative Function - Answers Resources are directed away from over crowded markets to markets that
are underserved
Barrier to Entry - Answers Any force that prevents firms from entering a new industry
Consumer Surplus - Answers Sum of differences between the buyers reservation price and the market
price
Elastic - Answers Percent change in quantity is greater than the percent change in price
Inflation - Answers A general increase in price and fall in the purchasing power of money
Price Elasticity of Supply - Answers The percent change in quantity supplied from a 1% change in price
Price Elasticity of Demand - Answers The percent change in quantity demanded from a 1% change in
price
Determinants of Price Elasticity of Demand - Answers Substitution Options
Budget Share
Time
Price Elasticity and Total Expenditure - Answers Depending on elasticity, a price change can decrease or
increase total expenditure
Explicit Costs - Answers Payments firms make to purchase resources and products from other firms
Principle of Comparative Advantage - Answers Says everyone does best when each person concentrated
on the activities for which their opportunity cost is lowest
Marginal Cost - Answers The change in total cost divided by output
Nominal Price - Answers The absolute price of a good in terms of dollars
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