I FORM EXAM REVIEW

A student generated review for the final exam.

LEGAL DISCLAIMER

• ***This should serve as a STUDY AID – and should not be the sole study technique that you use to prepare yourself for the

exam.• ***The accuracy of these notes may be in question...it is user

generated – like Wikipedia – so I would make sure that I double checked everything and crossed reference any

questionable areas.• ***There are concepts on the exam that ARE NOT INCLUDED

on this webpage – so do not think for a second that you can just study with this....

67 QUESTIONS.

STARTS......NOW!!!!

QUESTION:• How do you find the total costs?

ANSWER:• Fixed costs + variable costs

QUESTION:

• The amount of money it takes to produce “one more unit” is called what cost?

ANSWER:• Marginal cost

QUESTION:

• What are examples of fixed costs?

ANSWER:1. Mortgage, property taxes

QUESTION:

• define marginal revenue

ANSWER:• change in the total revenue that results from

selling “one more unit”

QUESTION:

• What effects does a contraction (or in some cases, recession) have on the economy

ANSWER:• The unemployment rate rises, factories cut

back on producing, and the economy as a whole is affected.

QUESTION:

• What happens at the economic peak?

ANSWER:• Factories are producing at full capacity, the

unemployment rate is low, and the economy is doing well.

QUESTION:

• What does an ideal or typical business cycle look like?

ANSWER:• It is very inconsistent, constantly rising and

falling in motions called expansions, peaks, contractions or recessions, and troughs. Then the cycle restarts.

QUESTION:

• Name three different levels of governments in our country

ANSWER:• Federal• State• Local

QUESTION:

• Name 3 of the 4 things that are expenditures of State governments

ANSWER:• Intergovernmental expenditures, Entitlement

programs, Public Welfare, or Subsidizing

QUESTION:

• Name 3 of the 4 thing that are expenditures of Local government

ANSWER:• Education, Fire and police protection, Water

supply or Sewage and sanitation

QUESTION:

• The Factor of Demand, Changes in Income is tied closely to how the _______ is doing?

ANSWER:• Economy

QUESTION:

• Price of Related Goods states that if Coca-Cola prices go up, Pepsi demand goes _______?

ANSWER:• UP!

QUESTION:

• In Changes in Expectations people guess the question ______A. If there might be a surplus?B. When will Jay Kelly get it?C. Is the Marginal Cost greater then Marginal

Revenue?D. What will the future bring?

ANSWER:• D: What will the future bring?

QUESTION:

• If price of DVD player goes down, demand for DVD’s goes ________?

ANSWER:• UP!

QUESTION:

• What is GDP?

ANSWER:• is the total value of all the final goods and

services produced in a country in one year.

QUESTION:

• How do we find GDP?

ANSWER:• To find GDP, we multiply the price of every

good or service in a country by the amount of that good or service and add everything up.

QUESTION:

• What are some weaknesses of GDP?

ANSWER:• Many other things raise a country’s well-being without raising

GDP, such as reduction in crime and drug and alcohol abuse. It is also just an estimate of the value of goods or services, and is only accurate only to a point. For example, some workers may be given food, fuel, or housing as part of their wages, while others aren’t. Furthermore, GDP measures quantity, not quality, and there is a great difference between an appliance today compared to a few years ago.

QUESTION:

• What is NDP and why is it a better way to measure standard of living?

ANSWER:• NDP takes GDP, and factors in depreciation.

Depreciation is wear and tear to durable goods that lowers their quality over time. For example, a new car is worth more than the same car 5 years later.

QUESTION:

• What is price ceiling?

ANSWER:• A price ceiling is where the government says

that the price of a good or service cannot go above a certain amount.

QUESTION:

• What is an example of price ceiling?

ANSWER:• An example of a price ceiling is on the rent of

buildings in New York City.

QUESTION:

• What is a price floor?

ANSWER:• A price floor is when the government says the

price cannot go below a certain amount.

QUESTION:

• What is an example of a price floor?

ANSWER:• An example is the minimum wage.

QUESTION:

• What are the six aspects of capitalism?

ANSWER:• Markets, economic freedom, private property

rights, competition, profit motive, and voluntary exchange

QUESTION:

• What does competition lead to?

ANSWER:• Competition between buyers and sellers

keeps the cost of production low and the quality of the goods higher than they would otherwise be.

QUESTION:

• What does private property rights five us the incentive to do?

ANSWER:• It gives us the incentive to work, save, and

invest because we know we can keep any gains that we might earn.

QUESTION:

• What do you think the 2 best aspects of capitalism and why?

ANSWER:• Markets• Economic Freedom• Private Property Rights• Competition• Profit Motive• Voluntary Exchange

Which ones did you pick?

QUESTION:

• unlimited wants and limited resources lead to what?

ANSWER:• scarcity

QUESTION:

• draw a diagram to show the choices all societies have to face.

ANSWER:Unlimited wants limited resources

Scarcity

Choices all societies have to face

What How For whom

QUESTION:

• What is the difference between human capital and physical capital?

ANSWER:• Human capital is the knowledge necessary for

manufacturing products, and physical capital is the tools you will need to make the products.

QUESTION:

• What is the definition of a market?

ANSWER:• A market is a place where goods and services

are bought and sold. Free and willing exchange

QUESTION:

• What is a command economy?

ANSWER:• A command economy is an economy in which

the government controls all decisions.

QUESTION:

• What is an entrepreneur?

ANSWER:• An entrepreneur is an individual who starts

their own business.

QUESTION:

• Why do societies have to choose how to produce?

ANSWER:• People also have to decide How to produce,

because there are many different options available in order to obtain a certain item, and businesses/individuals want to make the most logical, productive (and cheap) way to obtain these items

QUESTION:

• Why do societies have to choose for whom to produce?

ANSWER:• They must ask this, for they have to figure out

how goods and services will be distributed among the citizens

QUESTION:

• What are trade off’s?

ANSWER:• Alternative decisions between one thing to

another.

QUESTION:

• Give 2 examples of how the price of stock changes (not Supply and Demand

ANSWER:• rumors of possible takeover/ merger, tech breakthrough success of the company

QUESTION:

• What are the 2 ways a person can make $ off of the stock

ANSWER:• Dividends and Capital Gains

QUESTION:

• What is The Factor Market?

ANSWER:• Market where productive resources are

bought and sold. It’s where individuals can earn money. People provide the 4 Factors of Production

QUESTION:

• What is the Product Market?

ANSWER:• market where producers offer goods and

services for sale

QUESTION:

• What is the main purpose of the Factor Market?

ANSWER:• The main purpose of the Factor Market is to

provide the Factors of Production to businesses so they may produce more goods and services

QUESTION:

• If two people with different income spend the same amount of money on gas, why is this regressive tax?

ANSWER:• Because if your income is higher, your

percentage is lower, and if you make less your percentage higher making it a regressive.

QUESTION:

• What type of tax rate is this if all people are taxed 20% of their income?

ANSWER:• Proportional Tax

QUESTION:

• In a progressive tax, who is taxed more?

ANSWER:• Rich

QUESTION:

• What are Food Stamps?

ANSWER:• Money given to people in poverty to buy food

QUESTION:

• What is WIC?

ANSWER:• WIC provides money to women, infants, and

children who are under 5 to buy necessary items, and food

QUESTION:

• What should happen to wealth in socialism?

ANSWER:• distributed equally throughout society based

on some sort of method or formula

QUESTION:

• What would a socialist world transform?

ANSWER:• Human Nature

QUESTION:

• What are the two types of Collective Ownership?

ANSWER:• Communal Ownership and State Ownership

QUESTION:

• WHERE do people earn their wages?

ANSWER:• IN the FACTOR market

QUESTION:

• the business sector makes goods and services for us to purchase in the product market. The business sector buys goods and services from the product market so it can make more stuff for us to purchase.

ANSWER:• why are there arrows going both ways

between the business sector and the product MARKET?

QUESTION:

• What is a Factor market and what is a product market?

ANSWER:• a factor market is where people earn wages in

exchange for labor. A product market is where producers offer goods and services for sale!

QUESTION:

• What is the business sector and what is the consumer sector?

ANSWER:• the business sector receives payments for

making goods and services for us to purchase. The consumer sector is where people receive goods and services for money.

QUESTION:

• why does the arrow pointing to the foreign sector go both ways?

ANSWER:• because we sell products around the world

but we also buy from around the world as well!

QUESTION:

• what does the government give to the product market and what does it take from it?

ANSWER:• the government provides local services and it

buys goods and services for war and such.

QUESTION:

• What is the key principle of Laissez-Faire Economics?

ANSWER:• The government should have minimal

interference and only interfere to promote competition

QUESTION:

• What is a Natural Monopoly?

ANSWER:• a market situation in which the costs of

production are minimized, or lessened, by having a single firm produce the product

QUESTION:

• When does a natural monopoly usually happen?

ANSWER:• usually happens when there are numerous

companies competing for a service in which it requires items on public land (most likely telephone lines or a water distributer).

QUESTION:

• What type of tax is social security?

ANSWER:• A payroll tax that is only taken by the

government

QUESTION:

• Who receives Social Security benefits?

ANSWER:• The Elderly, the retired, and the disabled

QUESTION:

• What is mandatory spending?

ANSWER:• spending that DOES NOT need to be approved

annually by the government

QUESTION:

• What is discretionary spending?

ANSWER:• spending that DOES need to be approved

annually by the government.

QUESTION:

• What do entrepreneurs do?

ANSWER:• start new businesses, introduces new

products and improves processes

QUESTION:

• What are some examples of natural resources?

ANSWER:• surface land, water, fish, animals, forests, and

mineral deposits

QUESTION:

• What are wants?

ANSWER:• things we would like to have, such as

entertainment, vacations, and other items that make life more comfortable and enjoyable.

QUESTION:

• What is the definition of Economics?

ANSWER:• the study of how we make decisions in a

world in which resources are limited.

QUESTION:

• What is an economic system?

ANSWER:• way of producing the things its people want

and need.

QUESTION:

• What is marginal benefit?

ANSWER:• the additional satisfaction or benefit received

when one more unit is produced.

QUESTION:

• What is the BEST Kind of “GOOD” to buy?

ANSWER:

GOOD LUCK WITH YOUR STUDIES!

Eat a good breakfast!

Go to Sleep early!

Take Study Breaks every 30-45 minutes!

Find time to EXERCISE!

RELAX!