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Economics 201 Exam Questions And Correct Answers

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  • Economics 201

Economics 201 Exam Questions And Correct Answers...

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  • September 30, 2024
  • 16
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • Economics 201
  • Economics 201
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Easton
Economics 201 Exam Questions And Correct Answers


What is economics? - Answer A social science concerned with making optimal choices
under conditions of scarcity.



Scientific Method - Answer observe

make a hypothesis

test the hypothesis

reject, don't reject, or modify the hypothesis

continue to test



Marginal Analysis - Answer means "extra"



Is it worth is??

comparison b/w marginal benefit and marginal cost



Factors of Production - Answer Land - natural resources

Labor - physical & mental talents & efforts of people to produce goods and services



Capital- man-made products to make something else machinary



Entrepreneurial Ability- takes initiative, makes decisions, innovates, takes risks



Production Possibility Curve- Answer whats attainable and what isn't attainable.

attainable is inside the curve**

,Command Market- Answer known as Socialism & Communism

**Government ownership**

decisions are made by a central planning board



Free Market System- Answer known as Capitalism

Private ownership of resources

decisions based on markets



4 Basic Questions - Response 1. What products & services will be produced?

- dollar votes*

- what will succeed or fail



2. How are the products to be produced?

- at least cost per unit using most efficient methods

- technology & resource prices



3. For whom is the output produced?

- consumer's capability & desire to pay & obtain the product



4. How will the system encourage growth?

- Technological advance

- creative destruction



Circular Flow Model - Answer



Invisible Hand - Answer 1776: Wealth of Nations by Adam Smith

, Unity of private & social interest



virtues of the market system:

- efficiency

- incentives

- freedom



Law of Demand - Answer price falls, quantity demand rises.

price rises, quantity demand falls.



reasons:

- common sense

- law of diminishing marginal utility

- income effect & substitution effects



Law of Supply - Price increases, quantity supplied increases.

Price decreases, quantity supplied decreases.

reasons:

- price is incentives to producers

- at some point, price rises

Market Equilibrium - When the demand curve and supply curve cross.

Changes in Demand - Change in consumer tastes and preferences

Change in # of buyers

Change in income

- normal goods: income rises, ya buy more

- inferior goods: income goes up, ya buy less

change in price of related goods

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