Economics Spring 2014
FINAL EXAM REVIEW
QUESTION
People’s wants are unlimited. This fact means that
which of the following is always present?
scarcity
shortages
marginal utility
costs of production
ANSWER
People’s wants are unlimited. This fact means that
which of the following is always present?
scarcity
QUESTION
 Name the four stages of the business cycle.
ANSWER
 Name the four stages of the business cycle.
 EXPANSION
 PEAK
 CONTRACTION
 TROUGH
QUESTION
 What are the factors of production?
goods and services
 risk and opportunity
 land, labor, and capital
 wages, salaries, and profits

ANSWER
 What are the factors of production?

land, labor, and capital
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

ANSWER
 Which of the following would be included in the
study of macroeconomics?

Unemployment in the nation
QUESTION
 "Taxes ought to be lowered.” is an example of what
kind of economic language?
 Positive
 Normative
ANSWER
 "Taxes ought to be lowered.” is an example of what
kind of economic language?
 Normative
QUESTION
 Provide an example of specialization.
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.
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.

ANSWER
 What is the law of unintended consequences?

Actions often have unforeseen effects.
QUESTION
 Consumer sovereignty means…
ANSWER
 Consumer sovereignty means…
 customers decide whether any business succeeds or
fails
QUESTION
 Which kind of economy is most common today?
ANSWER
 Which kind of economy is most common today?

Mixed Economy
QUESTION
 Human-made goods that are used to produce other
goods and services are which type of resource?
ANSWER
 Human-made goods that are used to produce other
goods and services are which type of resource?
 Capital
QUESTION
 The three fundamental economic questions are
what to produce, ______________, and for
whom to produce.
ANSWER
 The three fundamental economic questions are
 what to produce,
 how to produce,
 and for whom to produce.
QUESTION
 Provide an example of the law of diminishing
marginal utility. (Bonus points for acting out or
illustrating your example)
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.
QUESTION
 The branch of economics that studies decision
making by individuals, families and businesses is
called what?
ANSWER
 The branch of economics that studies decision
making by individuals, families and businesses is
called what?

Microeconomics
QUESTION
 The act of transforming a private enterprise into a
government enterprise, is called what?
ANSWER
 The act of transforming a private enterprise into a
government enterprise, is called what?
 NATIONALIZATION
QUESTION
 What is an example of thinking at the margin?
(Bonus points for acting out or illustrating your
example)
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.
QUESTION
 The quantity supplied exceeds the quantity
demanded at the current price; this results in what
condition?
ANSWER
 The quantity supplied exceeds the quantity
demanded at the current price; this results in what
condition?
 Surplus
QUESTION
 The amount of soap made matches the amount of
soap that people want to buy; this results in what
condition?
ANSWER
 The amount of soap made matches the amount of
soap that people want to buy; this results in what
condition?

MARKET EQUILIBRIUM
QUESTION
 What is a price ceiling?
ANSWER
 What is a price ceiling?
 When a government or other agency sets a minimum
price of a good. Often below the equilibrium price.
QUESTION
 What is the result of a price ceiling set below the
equilibrium?
ANSWER
 What is the result of a price ceiling set below the
equilibrium?

SHORTAGE
QUESTION
 Illustrate the law of demand
ANSWER
 Illustrate the law of demand
QUESTION
 Illustrate the law of supply
ANSWER
 Illustrate the law of supply
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

ANSWER
 If the demand for a good increases because
consumer income increases, the good is called
what?
 Normal
good
QUESTION
 What causes the demand curve to shift left?
ANSWER
 What causes the demand curve to shift left?

A decrease in overall demand.
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?
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
QUESTION
 In which market structure do producers have the
most market power?
monopolistic competition
 monopoly
 oligopoly
 perfect competition

ANSWER
 In which market structure do producers have the
most market power?
 monopoly
QUESTION
 Name three categories of economic activity NOT
included in the GDP.
ANSWER
 Name three categories of economic activity NOT
included in the GDP.





Secondhand Transactions
Transfer Payments
Stock Market Transactions
Nonmarket Activities
The Underground Economy
QUESTION
 ______________ is valued at prices in a base
year.
 Real GDP
 Nominal GDP
ANSWER
 ______________ is valued at prices in a base
year.
 Real GDP
QUESTION
 What are Adam Smith’s Four Maxims regarding
taxation?
ANSWER
 What are Adam Smith’s Four Maxims regarding




taxation?
Equity
Certainty
Convenience
Efficiency
QUESTION
 What are the four types of unemployment?
ANSWER
What are the four types of unemployment?
frictional unemployment
structural unemployment
seasonal unemployment
cyclical unemployment
FINAL QUESTION
Label the stages of the business cycle