ECN211 Exam 1 Review ASU with Complete Solutions
Ten Principes - Correct Answer Principle 1: People face tradeoffs
Principle 2: The cost of something what you give up getting it
Principle 3: Rational people think at the margin
Principle 4: People respond to incentives
Principle 5: Trade can make everyone better off
Principle 6: Markets are usually a good way to organize economic
Principle 7: Government can sometimes improve market outcomes
Principle 8: A country's standard of living depends on its ability to produce goods and services
Principle 9: Prices rise when government prints too much money
Principle 10: Society faces a short-run trade off between inflation and unemployment First 4 principles have to do with what? - Correct Answer How people make descisions What do the last 4 principles have to do with? - Correct Answer Productivity are the ultimate source of living Scarcity - Correct Answer The limited nature of society's resources Economics - Correct Answer The study of how society manages its scarce resources The economist plays 2 roles - Correct Answer Scientist: Trying to explain the world
Policy Advisers: Trying to improve the world
Circular-flow diagram is what? - Correct Answer A visual model of the economy, slows how dollars and goods and services flow through markets among households and firms 1 / 2
Factors of production are defined as? and what are some examples? - Correct Answer the resources the economy uses to produce goods and services including
- Labor
- Land
- Capital (buildings and machines used in production)
- Buy and consume goods and services
- Sell goods and services for wages, rent, and profit
- Law of demand: claim that the quantity demanded of a good falls when the price of the good rises,
- Pay attention to the difference between a change in quantity demanded and a change in demand
- / 2
Households in the circular-flow diagram do what? - Correct Answer 1. Own the factors of production, sell/rent them to firms for income
Firms in the circular-flow diagram do what? - Correct Answer 1. Buy/hire factors of production, use them to produce goods and services
PPF is a graph that... - Correct Answer shows the combinations of two goods the economy can possibly produce given the available resources and the available technology When a PPF has a lower slope it has a... - Correct Answer lower opportunity cost Market is a. - Correct Answer group of buyers and sellers Buyer behavior: Demand - Correct Answer 1. Quantity demanded of any good is the amount of the good that buyers are willing and able to purchase
other things equal
Demand schedule - Correct Answer Table that shows the relationship between the price of a good and the quantity demanded Economy - Correct Answer okimonos "one who manages a household"