1. Economics Spring 2014
Final Exam Review

2. QUESTION
People’s wants are unlimited. This fact means that which of the following is always present?
scarcity
shortages
marginal utility
costs of production

3. ANSWER
People’s wants are unlimited. This fact means that which of the following is always present?
scarcity

4. QUESTION
Name the four stages of the business cycle.

5. ANSWER Name the four stages of the business cycle. EXPANSION PEAK
CONTRACTION
TROUGH

6. QUESTION What are the factors of production? goods and services
risk and opportunity
land, labor, and capital
wages, salaries, and profits

7. ANSWER
What are the factors of production?
land, labor, and capital

8. QUESTION
Which of the following would be included in the study of macroeconomics?
Salaries of college professors
Computer prices
Unemployment in the nation
Silver prices

9. ANSWER
Which of the following would be included in the study of macroeconomics?
Unemployment in the nation

10. QUESTION
"Taxes ought to be lowered.” is an example of what kind of economic language?
Positive
Normative

11. ANSWER
"Taxes ought to be lowered.” is an example of what kind of economic language?
Normative

12. QUESTION
Provide an example of specialization.

13. ANSWER
Specialization is when individual workers become highly skilled at a specific task and focus their efforts on that task, leaving other jobs to be done by other highly skilled workers.
EX: An assistant in a tailoring shop only replaces zippers.

14. QUESTION What is the law of unintended consequences?
Attempts to intervene always backfire.
Actions often have unforeseen effects.
Markets are always influenced by emotional factors.
Economic booms are always followed by downturns.

15. ANSWER What is the law of unintended consequences?
Actions often have unforeseen effects.

16. QUESTION
Consumer sovereignty means…

17. ANSWER Consumer sovereignty means…
customers decide whether any business succeeds or fails

18. QUESTION
Which kind of economy is most common today?

19. ANSWER
Which kind of economy is most common today?
Mixed Economy

20. QUESTION
Human-made goods that are used to produce other goods and services are which type of resource?

21. ANSWER
Human-made goods that are used to produce other goods and services are which type of resource?
Capital

22. QUESTION
The three fundamental economic questions are what to produce, ______________, and for whom to produce.

23. ANSWER The three fundamental economic questions are what to produce,
how to produce,
and for whom to produce.

24. QUESTION
Provide an example of the law of diminishing marginal utility. (Bonus points for acting out or illustrating your example)

25. ANSWER
Provide an example of the law of diminishing marginal utility. (Bonus points for acting out or illustrating your example)
A new toy is less exciting to a child with many toys than to a child with just a few.
Someone who has one bicycle will have less use for another.

26. QUESTION
The branch of economics that studies decision making by individuals, families and businesses is called what?

27. ANSWER
The branch of economics that studies decision making by individuals, families and businesses is called what?
Microeconomics

28. QUESTION
The act of transforming a private enterprise into a government enterprise, is called what?

29. ANSWER
The act of transforming a private enterprise into a government enterprise, is called what?
NATIONALIZATION

30. QUESTION
What is an example of thinking at the margin? (Bonus points for acting out or illustrating your example)

31. ANSWER
What is an example of thinking at the margin? (Bonus points for acting out or illustrating your example)
John has six shirts and is trying to decide whether to buy a seventh.

32. QUESTION
The quantity supplied exceeds the quantity demanded at the current price; this results in what condition?

33. ANSWER
The quantity supplied exceeds the quantity demanded at the current price; this results in what condition?
Surplus

34. QUESTION
The amount of soap made matches the amount of soap that people want to buy; this results in what condition?

35. ANSWER
The amount of soap made matches the amount of soap that people want to buy; this results in what condition?
MARKET EQUILIBRIUM

36. QUESTION
What is a price ceiling?

37. ANSWER What is a price ceiling?
When a government or other agency sets a minimum price of a good. Often below the equilibrium price.

38. QUESTION
What is the result of a price ceiling set below the equilibrium?

39. ANSWER
What is the result of a price ceiling set below the equilibrium?
SHORTAGE

40. QUESTION
Illustrate the law of demand

41. ANSWER
Illustrate the law of demand

42. QUESTION
Illustrate the law of supply

43. ANSWER
Illustrate the law of supply

44. QUESTION
If the demand for a good increases because consumer income increases, the good is called what?
Inferior good
Normal good
Necessity good
Luxury good

45. ANSWER
If the demand for a good increases because consumer income increases, the good is called what?
Normal good

46. QUESTION
What causes the demand curve to shift left?

47. ANSWER What causes the demand curve to shift left?
A decrease in overall demand.

48. QUESTION
A measure of the degree to which the quantity demanded or supplied of a good or service changes in response to a change in price is called what?

49. ANSWER
A measure of the degree to which the quantity demanded or supplied of a good or service changes in response to a change in price is called what?
Elasticity

50. QUESTION
In which market structure do producers have the most market power?
monopolistic competition
monopoly
oligopoly
perfect competition

51. ANSWER
In which market structure do producers have the most market power?
monopoly

52. QUESTION
Name three categories of economic activity NOT included in the GDP.

53. ANSWER
Name three categories of economic activity NOT included in the GDP.
Secondhand Transactions
Transfer Payments
Stock Market Transactions
Nonmarket Activities
The Underground Economy

54. QUESTION ______________ is valued at prices in a base year. Real GDP
Nominal GDP

55. ANSWER
______________ is valued at prices in a base year.
Real GDP

56. QUESTION
What are Adam Smith’s Four Maxims regarding taxation?

57. ANSWER What are Adam Smith’s Four Maxims regarding taxation? Equity
Certainty
Convenience
Efficiency

58. QUESTION
What are the four types of unemployment?

59. ANSWER What are the four types of unemployment?
frictional unemployment
structural unemployment
seasonal unemployment
cyclical unemployment

60. FINAL QUESTION

61. Label the stages of the business cycle