Economics Final Exam Study Guide

Opportunity cost is:

• The cost of an opportunity missed when choosing one option over another.

• The total money spent on a project.

• The profit earned from an investment.

• The price of goods in the market.

Each economic system is characterized by which of the following?

• The way resources are allocated and decisions are made

• The type of government in power

• The size of the population

• The climate of the country

What are the three basic economic questions that every economic system must ask themselves?

• What to produce, how to produce, and for whom to produce?

• What to buy, how to sell, and where to invest?

• Who to hire, what to pay, and when to fire?

• How to save, where to spend, and when to borrow?

A price ceiling is:

• A minimum legal price that can be charged for a good or service

• A maximum legal price that can be charged for a good or service

• The equilibrium price in a market

• A price set by producers above the market price

A price floor is:

• A minimum price set by the government above equilibrium price, found above equilibrium on a graph, used to prevent prices from falling too low, and can cause a surplus.

• A maximum price set by the government below equilibrium price, found below equilibrium on a graph, used to prevent prices from rising too high, and can cause a shortage.

• A tax imposed on goods to increase government revenue, found at the intersection of supply and demand, and can cause deadweight loss.

• A subsidy given to producers to lower production costs, found below the supply curve, and can cause increased production.

What is a monopoly? What is the Sherman Antitrust Act and why was it necessary? How does it make the economy better for consumers?

• A monopoly is when one company controls an entire market. The Sherman Antitrust Act was a law to prevent monopolies and promote competition, making the economy better for consumers by encouraging lower prices and more choices.

• A monopoly is when many companies share a market. The Sherman Antitrust Act was a law to encourage monopolies, making the economy better for consumers by reducing competition.

• A monopoly is when the government owns all businesses. The Sherman Antitrust Act was a law to eliminate competition, making the economy better for consumers by raising prices.

• A monopoly is when consumers control the market. The Sherman Antitrust Act was a law to support monopolies, making the economy better for consumers by limiting choices.

What is product differentiation? Why is it necessary? What market structure is the present?

• Product differentiation is making a product unique to stand out from competitors; it is necessary to attract customers and is present in monopolistic competition.

• Product differentiation is selling identical products; it is necessary to reduce costs and is present in perfect competition.

• Product differentiation is lowering prices below competitors; it is necessary to increase sales and is present in monopoly.

• Product differentiation is government regulation of products; it is necessary for safety and is present in oligopoly.

The factors of production are:

• Land, Labor, Capital, and Entrepreneurship

• Money, Machines, Materials, and Management

• Land, Labor, Technology, and Transport

• Resources, Revenue, Risk, and Return

The Better Business Bureau is:

• A government agency that regulates businesses

• A non-profit organization that promotes ethical business practices

• A trade association for large corporations

• A financial institution that offers loans

The Truth in Lending Act of 1968 protects the rights of credit card users by:

• Requiring lenders to disclose credit terms and costs clearly.

• Allowing unlimited interest rates on credit cards.

• Prohibiting the use of credit cards for online purchases.

• Mandating that all credit cards have the same interest rate.