AREC 202 Midterm – Kroll UPDATED ACTUAL Questions and CORRECT Answers
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Course
AREC 202
Institution
AREC 202
AREC 202 Midterm – Kroll UPDATED
ACTUAL Questions and CORRECT
Answers
What is economics, and what does it have to do with your life? - CORRECT ANSWER-
The study of how people make choices under conditions of scarcity
What is the difference between microeconomics and macroeconomics? - CORR...
AREC 202 Midterm – Kroll UPDATED
ACTUAL Questions and CORRECT
Answers
What is economics, and what does it have to do with your life? - CORRECT ANSWER✔✔-
The study of how people make choices under conditions of scarcity
What is the difference between microeconomics and macroeconomics? - CORRECT
ANSWER✔✔- Macro: the study of national economies and policies the government uses to
improve performance.
Micro: the study of choice under scarcity and its implications for behaviors of
prices/quantities for an individual market.
What are the opportunity costs in general? How are they being calculated in a table with two
countries and two goods? - CORRECT ANSWER✔✔- he opportunity cost of a good is what
one would sacrifice in order to make a different good. The opportunity cost for Australia to
make one computer is three boomerangs.
What is a sunk cost? - CORRECT ANSWER✔✔- a cost that has already been committed
and cannot be recovered
What are marginal costs? - CORRECT ANSWER✔✔- the additional cost of the next unit
produced
What does "marginal" mean (as in marginal costs, marginal benefits, marginal willingness-to-
pay, etc.)? - CORRECT ANSWER✔✔- Additional or one more unit
How is the optimal level of an activity determined, using (marginal) benefits and (marginal)
costs? - CORRECT ANSWER✔✔- When the maximum amount of marginal benefits
outweighs the marginal costs
What is the Production Possibilities Curve? - CORRECT ANSWER✔✔- A graph the
describes the maximum amount of one good that can be produced for every possible level of
production.
, Can a PPC be upward-sloping? - CORRECT ANSWER✔✔- No
Which points in the PPC graph are efficient/attainable/not attainable? - CORRECT
ANSWER✔✔- Attainable but not efficient: anything below the line.Efficient: anything on
the line.Not attainable: anything above the line.
What are comparative and absolute advantage? - CORRECT ANSWER✔✔- Comparative:
the producer who has a lower opportunity cost of producing that good.Absolute: the producer
is more productive in producing a good.
In a world with just two goods and two countries, can a country have an absolute advantage
for both goods? - CORRECT ANSWER✔✔- Yes
In a world with just two goods and two countries, can a country have a comparative
advantage for both goods? - CORRECT ANSWER✔✔- No, only one country can have the
comparative advantage in a good.
What are consequences of people/countries having a comparative advantage (consequences
for specialization and trade)? - CORRECT ANSWER✔✔- Comparative advantage drives
countries to specialize in the production of the goods for which they have the lowest
opportunity cost
Everyone wants you good and wants you to make their good. You may be the only person
who can make that good and that can cause you to have enemies. You cannot trade with
everyone
Why and when can specialization and trade make everybody involved better off? -
CORRECT ANSWER✔✔- Because they can all trade and benefit from one another.
Why can the consumption possibilities of a country be larger than its production possibilities
if it specializes and trades? - CORRECT ANSWER✔✔- Trade between two agents or
countries allows the countries to enjoy a higher total output and level of consumption than
what would have been possible domestically.
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