Test #1 Study Guide
CHAPTERS 1 and 2 Introduction and Economic Models
1. Define economics. Differentiate between macro and microeconomics. 2. Explain the concept of scarcity.
3. Explain how marginal costs and marginal benefits influence incentives and choice. 4. Define and explain the difference between efficiency and equity. 5. What is the difference between positive and normative economics? 6. What is ceteris paribus?
7. Explain the concept of opportunity cost. What is the Law of Increasing Opportunity Costs? 8. Define the economizing problem, incorporating the relationship between limited resources and unlimited wants. 9. Construct a production possibilities curve when given the appropriate data. 10. Illustrate economic growth, economic decline, unemployment/underemployment of resources, allocative and productive efficiency, and the law of increasing opportunity costs using a productions possibilities curve. 11. Differentiate between present and future consumption and why this concept is important to economic growth. 12. What causes the production possibilities curve to shift outward (to the right = economic growth)? 13. What causes the production possibilities curve to shift inward (to the left = economic decline)? 14. Identify the major groups of decision makers and the major markets in a market system using the circular flow chart. 15. Identify types of economic resources and the types of income associated with each. (reference circular flow diagram) 16. Differentiate between product and resource markets.
17. Identify the two roles that households and businesses play in the circular flow diagram.
CHAPTERS 3 & 4 Supply and Demand and the Market Strikes Back
NO CONSUMER OR PRODUCER SURPLUS QUESTIONS.
NO DEADWEIGHT LOSS QUESTIONS. NO ELASTICITY QUESTIONS. 18. State the Law of Demand and the Law of Supply. What is a market? 19. Differentiate between demand and quantity demanded, supply and quantity...