Economics Final Exam Study Guide

Explain in your own words why individuals, businesses, and governments must make choices and identify the costs of those choices.

• Individuals, businesses, and governments must make choices because resources are limited, and they must decide how to allocate them. The costs of those choices are the trade-offs or opportunity costs involved in selecting one option over another.

• Individuals, businesses, and governments make choices because they want to avoid making any decisions and there are no costs involved.

• Individuals, businesses, and governments must make choices because resources are unlimited, so they can have everything they want without any trade-offs.

• Individuals, businesses, and governments make choices only to increase profits, and there are no opportunity costs involved.

Use and interpret a PPC (Production Possibilities Curve) graph to show tradeoffs, efficiency, and growth.

• A PPC graph shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently utilized. Points on the curve show efficiency, points inside show inefficiency, and points outside are unattainable. Tradeoffs are shown by moving along the curve, and growth is shown by an outward shift of the curve.

• A PPC graph shows the minimum possible output combinations of two goods or services an economy can achieve, with all points on the curve representing inefficiency.

• A PPC graph only shows the production of a single good and does not illustrate tradeoffs or economic growth.

• A PPC graph demonstrates how resources are always underutilized, and points outside the curve are always attainable.

Compare the 4 different types of economic systems and identify examples of each.

• The four types of economic systems are traditional, command, market, and mixed. Examples: Traditional - rural tribes; Command - North Korea; Market - United States (to a large extent); Mixed - most modern economies like France or the UK.

• The four types of economic systems are feudal, capitalist, socialist, and anarchist. Examples: Feudal - medieval Europe; Capitalist - Cuba; Socialist - United States; Anarchist - Somalia.

• The four types of economic systems are barter, digital, agricultural, and industrial. Examples: Barter - Amazon tribes; Digital - Silicon Valley; Agricultural - Egypt; Industrial - Antarctica.

• The four types of economic systems are monarchy, democracy, oligarchy, and theocracy. Examples: Monarchy - Canada; Democracy - Saudi Arabia; Oligarchy - Switzerland; Theocracy - Japan.

Explain the role of government in a mixed economy and analyze how policy decisions create incentives (or disincentives) for society.

• In a mixed economy, the government intervenes to regulate or support certain sectors, provide public goods, and correct market failures. Policy decisions such as taxes, subsidies, or regulations can create incentives or disincentives for individuals and businesses.

• In a mixed economy, the government has no role and all decisions are made by private businesses without any regulations or interventions.

• In a mixed economy, the government only provides public goods and does not influence incentives or disincentives through policy decisions.

• In a mixed economy, the government controls all sectors and eliminates private enterprise entirely.

Define the 'law of demand' and explain the difference between demand and quantity demanded.

• The law of demand states that, all else being equal, as the price of a good increases, the quantity demanded decreases. Demand refers to the entire relationship between price and quantity demanded, while quantity demanded is the specific amount at a specific price.

• The law of demand states that as the price of a good increases, the demand for the good increases. Demand and quantity demanded are the same concept.

• The law of demand states that, all else being equal, as the price of a good increases, the quantity demanded increases. Demand refers only to luxury goods.

• The law of demand states that demand and quantity demanded are unrelated. Demand is the specific amount at a specific price, while quantity demanded is the entire relationship between price and quantity demanded.

Define the 'law of supply' and explain the difference between supply and quantity supplied.

• The law of supply states that, all else being equal, as the price of a good increases, the quantity supplied increases. Supply refers to the entire relationship between price and quantity supplied, while quantity supplied is the specific amount at a specific price.

• The law of supply states that, all else being equal, as the price of a good increases, the quantity supplied decreases. Supply and quantity supplied both refer to the same concept.

• The law of supply states that, all else being equal, as the price of a good decreases, the quantity supplied increases. Supply is only the amount supplied at one price.

• The law of supply states that, all else being equal, as the price of a good increases, the demand increases. Supply and quantity supplied are unrelated concepts.

Explain in your own words how supply and demand work together to create mutually beneficial voluntary exchange.

• Supply and demand interact in the market to determine prices and quantities exchanged. When buyers and sellers agree on a price, voluntary exchange occurs, benefiting both parties.

• Supply and demand work independently of each other, and prices are set by the government to ensure fairness.

• Supply and demand only affect the quantity of goods produced, not the price or the exchange process.

• Supply and demand prevent voluntary exchange by creating barriers between buyers and sellers.

Identify the effects of regulation on the free market and analyze the advantages and disadvantages of regulations such as price floors and price ceilings.

• Regulations like price floors (minimum prices) and price ceilings (maximum prices) can prevent markets from reaching equilibrium, leading to surpluses or shortages. Advantages include protecting consumers or producers; disadvantages include inefficiency and unintended consequences.

• Regulations like price floors and price ceilings always ensure that markets reach equilibrium and eliminate all inefficiencies.

• Price floors and price ceilings have no impact on market outcomes and do not affect consumers or producers.

• The only effect of price floors and price ceilings is to increase government revenue, with no impact on market equilibrium.

Compare the 4 different market structures that exist and identify examples of each.

• The four market structures are perfect competition, monopolistic competition, oligopoly, and monopoly. Examples: Perfect competition - agriculture; Monopolistic competition - restaurants; Oligopoly - airlines; Monopoly - local utilities.

• The four market structures are perfect competition, monopolistic competition, duopoly, and monopoly. Examples: Perfect competition - car manufacturing; Monopolistic competition - oil companies; Duopoly - local utilities; Monopoly - restaurants.

• The four market structures are perfect competition, monopolistic competition, oligopoly, and duopoly. Examples: Perfect competition - local utilities; Monopolistic competition - airlines; Oligopoly - agriculture; Duopoly - restaurants.

• The four market structures are perfect competition, monopolistic competition, oligopoly, and monopoly. Examples: Perfect competition - airlines; Monopolistic competition - agriculture; Oligopoly - restaurants; Monopoly - car manufacturing.

Identify different factors that influence the circular flow of the economy.

• Factors influencing the circular flow of the economy include households, businesses, government, financial institutions, and foreign markets. Their interactions determine the flow of goods, services, and money.

• Only households and businesses influence the circular flow of the economy, with no role for government or foreign markets.

• The circular flow of the economy is influenced solely by technological advancements and natural resources.

• Only government policies determine the flow of goods, services, and money in the economy.