Econ Honors Final Exam Study Guide (Fall 2024) PDF

**ECON. HONORS -- FINAL EXAM STUDY GUIDE (FALL 2024) *Mr. Walters*** *-the exam is scheduled for October 9 & 10 -the exam will be ZipGrade / multiple choice / true-false -use a \#2 pencil -each replacement zip-grade forms will result in a two-point deduction* **[SCARCITY]** 1\. Economics is the s...

**ECON. HONORS -- FINAL EXAM STUDY GUIDE (FALL 2024) *Mr. Walters*** *-the exam is scheduled for October 9 & 10 -the exam will be ZipGrade / multiple choice / true-false -use a \#2 pencil -each replacement zip-grade forms will result in a two-point deduction* **[SCARCITY]** 1\. Economics is the study of \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P.5) *-HOW PEOPLE MAKE DECISIONS TO SATISFY THEIR WANTS AND NEEDS* 2\. What is the difference between scarcity and shortage? (P.5) *-SCARCITY AWAYS EXISTS WHILE SHORTAGES CAN BE SOLVED* 3\. Name the three factors of production (P. 6) *LAND LABOR CAPITAL* 4\. Name the two definitions of capital that pertain to economics. (P. 6) *-A POOL OF MONEY AVAILABLE FOR INVESTMENT* *-ANY RESOURCE MADE BY PEOPLE THAT IS USED IN PRODUCTION* **[ECONOMIC SYSTEMS]** 5\. Rank the following countries from being the most pro free market to having the most centrally planned economies. (P. 25) *Iran, Mexico, North Korea, Iran, United States & Canada* 6\. Name the three key questions of economics. (P. 26/27) *-WHAT TO PRODUCE* *-HOW TO PRODUCE* *-FOR WHOM TO PRODUCE* 7\. Define profit. (P. 27) *-THE AMOUNT OF MONEY A BUSINESS RECEIVES IN EXCESS OF ITS EXPENSES* 8\. Define product market and factor market. (P. 33) *-THE ARENA OF EXCHANGE IN WHICH HOUSEHOLDS PURCHASE GOODS AND SERVICES FROM FIRMS* *- THE ARENA OF EXCHANGE IN WHICH FIRMS PURCHASE GOODS THE FACTORS OF PRODUCTION FROM HOUSEHOLDS* 9\. List three advantage of a free market economy. (P. 35) *-FREEDOM OF CHOICE FOR CONSUMERS AND PRODUCERS* *-VARIETY OF GOODS AND SERVICES* *-EFFICIENT RESONSE TO CHANGING MARKET CONDITIONS* 10\. Define the invisible hand. (P. 35) *-A GOVERNMENT PLANNED ECONOMY IS LESS EFFIEICNT THAN ALLOWING BUSINESSES IND INDIVIDUALS TO MAKE THEIR OWN DECISIONS -THE SELF-RGULATING NATURE OF THE MARKETPLACE* 11\. Name three traits of socialism that are not found in communism. (P. 40) *-SOME PRIVATE PROPERTY OWNERSHIP IS ALLOWED* *-A RANGE OF ECONOMIC SYSTEMS CAN BE PRESENT* *-CAN BE PART OF A DEMOCRACY* 12\. Which of the following is a characteristic of communism but not socialism? (P. 40) *-BROUGHT ABOUT BY REVOLUTIONARY CHANGE* *-AUTHORITARIAN GOVERNMENT* *-ALL PRODUCTION IS CONTROLLED AND OWNED BY THE STATE* 13\. Name an outcome of fixed wages under communism. (P. 43) *-WORKERS HAVE LITTLE INCENTIVE TO BE MORE PRODUCTIVE* 14\. Name three outcomes of the goal of equity under communism. (P. 43) *-GOVERNMENT OFFICIALS RECEIVE MORE PAY AND HAVE ACCESS TO BETTER GOODS* *-CHRONIC SHORTAGES* *-LOW-QUALITY GOODS FOR THE MASSES* 15\. Define laissez faire.(P. 44) *-THE DOCTRINE THAT GOVERNMENT GENERALLY SHOULD NOT INTERVENE IN THE MARKETPLACE* 16\. Define macroeconomics and microeconomics (glossary) *-THE STUDY OF ECONOMIC BEHAVOIR AND DECISION-MAKING IN A NATION'S WHOLE ECONOMY (MACRO)* *-THE STUDY OF ECONOMIC BEHAVIOR AND DECISION MAKING IN SMALL UNITS, SUCH AS HOUSEHOLDS AND FIRMS (MICRO)* 17\. Define free rider. (glossary) *-SOMEONE WHO WOULD NOT BE WILLING TO PAY FOR A CERTAIN GOOD OR SERVICE BUT WHO WOULD GET THE BENEFITS OF IT ANYWAY IF IT WERE PROVIDED AS A PUBLIC GOOD* 18\. Define market failure. (glossary) *-A SITUATION IN WHICH THE FREE MARKET, OPERATING ON ITS OWN, DOES NOT DISTRIBUTE RESOURCES EFFICIENTLY* 19\. Define public good. (glossary) *-A SHARED GOOD OR SERVICE FOR WHICH IT WOULD BE INEFFICIENT OR IMPRACTICAL TO MAKE CONSUMERS PAY INDIVIDUALLY AND TO EXCLUDE THOSE WHO DID NOT PAY* 20\. Define externality. (glossary) *-AN ECONOMIC SIDE EFFECT OF A GOOD OR SERVICE THAT GENERATES BENEFITS OR COSTS TO SOMEONE OTHER THAN THE PERSON DECIDING HOW MUCH TO PRODUCE OR CONSUME* **[SUPPLY AND DEMAND]** 21\. Define the law of demand. (P. 79) *-AS PRICES GO DOWN, DEMAND INCREASES* 22\. The price of coffee at Starbucks goes up. Sally responds by making tea at home. This is the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P. 79 and 80) *-SUBSTITUTION EFFECT* 23\. Jerry finds a new job that boosts his pay by twenty percent. He stops dining at McDonalds and now frequents Chilis. This is the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P. 79 and 80) *-INCOME EFFECT* 24\. Becky's doctor prescribes a drug to treat her medical condition. The pharmacist tells her that a thirty-day supply cost \$475. She inquires about a generic version of the drug and learns that she only has to pay \$8 for a thirty-day supply. She opts for the generic version. This is the \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P. 79 and 80) *-SUBSTITUTION EFFECT* 25\. View the table below. Name price and quantity combination from the table below would bring in the greatest profit. https://media.edgenuity.com/evresources/3314/3314-02/3314-02-09/3314-02-09-assessment/3314-02-09-12.png 26\. What change is illustrated by the shift happening on the graph below? *-DEMAND HAS DECREASED*  27\. Define normal good and inferior good. (P. 79) *-A GOOD THAT CONSUMERS DEMAND MORE OF WHEN THEIR INCOME INCREASES* *-A GOOD THAT CONSUMERS DEMAND LESS OF WHEN THEIR INCOME INCREASES* 28\. Define complementary goods and substitute goods. (P. 86 & 87) *-TWO GOODS THAT ARE BOUGHT AND USED TOGETHER* *-GOODS THAT ARE USED IN PLACE OF ONE ANOTHER* 29\. Define elastic demand and inelastic demand. (P. 88 & 94) *-DESCRIBES DEMAND THAT IS SENSITIVE TO A CHANGE IN PRICE* *-DESCRIBES DEMAND THAT IS NOT SENSITIVE TO A CHANGE IN PRICE* 30\. Define the law of supply. (P. 95) *-PRODUCERS OFFER MORE OF A GOOD OR SERVICE AS ITS PRICE INCREASES AND LESS AS ITS PRICE FALLS* 31\. Define fixed cost and variable cost. (P. 103) *-A COST THAT DOES NOT CHANGE NO MATTER HOW MUCH OF A GOOD OR SERVICE IS PRODUCED* *-A COST THAT RISES OR FALLS DEPENDING ON THE QUANTITY PRODUCED* 32\. Name two examples of fixed costs and variable costs. (P. 103) *-RENT AND MACHINERY ARE FIXED COSTS* *-HOURLY WAGES AND RAW MATERIALS ARE VARIABLE COSTS* 33\. State the effect on supply and cost brought about by excise taxes, regulation, and subsidies. (P. 109-110) *-EXCISE TAXES AND REGULATION INCREASE COSTS AND LOWER SUPPLY* *-SUBSIDIES LOWER COSTS AND INCREASE SUPPLY AND LOWER COSTS* 34\. Evaluate the following three examples and state which events would increase the supply of the import in question. (P. 111) *-A PAY INCREASE FOR EAST INDIAN CARPET MAKERS / SUPPLY GOES DOWN* *-A NEW OILFIELD OPENS IN IRAQ / SUPPLY GOES UP* *-AN IMPORT BAN ON FOREIGN PRODUCED SUGAR / SUPPLY GOES DOWN* 35\. In the graph below, what needs to happen to the price indicated by P2 on the graph in order to achieve equilibrium? *-THE PRICE NEEDS TO BE LOWERED* A graph titled Excess supply has quantity on the x-axis and price on the y-axis. A line with positive slope represents supply and a line with negative slope represents demand. The lines intersect at the point of equilibrium (p star, Q star). A point on the demand line is (P 2, quantity demanded) and a point on the supply line is (P 2, quantity supplied). Both points are higher than the point of equilibrium. Excess supply is indicated between the 2 points. 36\. Evaluate minimum wage and rent control and determine which is an example of a price floor and which is an example of a price ceiling. (P. 117-119) *-MINIMUM WAGE = PRICE FLOOR* *-RENT CONTROL = PRICE CEILING* 37\. Why are rent controlled apartments often poorly maintained? (P. 118-119) *-THERE IS NO INCENTIVE TO MAKE THE PROPERTY BETTER* 38\. Rationing is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P. 128-131) *-A SYSTEM OF ALLOCATING GOODS AND SERVICES USING CRITERIA OTHER THAN PRICE* 39\. The black market \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P. 128-131) *-AN EXCHANGE OF GOODS WITHOUT REGARD FOR GOV'T CONTROLS OR PRICE OR QUANTITY* 40\. Bartering is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P. 128-131) *-THE EXCHANGE OF ONE TYPE OF GOOD OR SERVICE FOR ANOTHER* 41\. A supply shock is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P. 128-131) *-A SUDDEN SHORTAGE OF A GOOD SUCH AS GASOLINE OR WHEAT* 42\. In a mixed-market economy, prices are set by \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. *-SUPPLY AND DEMAND* **[COMPETITION AND MARKET STRUCTURES]** 43\. Define monopoly. (glossary) *-A SINGLE SELLER DOMINATES* 44\. Define monopolistic competition. (glossary) *-MANY COMPANIES SELL PRODUCTS THAT ARE SIMILAR BUT NOT IDENTICAL* 45\. Define pure competition / perfect competition. (glossary) *-A LARGE NUMBER OF FIRMS ALL PRODUCE THE SAME PRODUCT AND NO SINGLE SELLER CONTROLS SUPPLY OR PRICES* 46\. Define oligopoly. (glossary) *-A FEW LARGE FIRMS DOMINATE A MARKET* 47\. A watermelon farm would be classified as \_\_\_\_\_\_\_\_\_\_\_\_ while an airline would be classified as \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. *-PURE COMPETITION / OLIGOPOLY* 48\. Define market power (glossary) *[-THE ABILITY OF A COMPANY TO CONTROL PRICES AND TOTAL MARKET OUTPUT]{.smallcaps}* 49\. Define franchise (glossary) *[-A CONTRACT THAT GIVES A SINGLE FIRM THE RIGHT TO SELL ITS GOOD WITHIN AN EXCLUSIVE MARKET]{.smallcaps}* 50\. Define license (glossary) *[-A GOVERNMENT ISSUED RIGHT TO OPERATE A BUSINESS]{.smallcaps}* **[BUSINESS AND LABOR]** 51\. Name an advantage and disadvantage of sole proprietorships. (P. 176 -- 191) *-ADVANTAGE: FULL CONTROL* *-DISADVANTAGE: LIMITED ACCESS TO RESOURCES* 52\. In the structure of a corporation, who chooses the board of directors? (P. 188) *-THE STOCKHOLDERS* 53\. Which event or trend brought about the beginning of labor unions? (P. 214) *-THE INDUSTRIAL REVOLUTION* 54\. Laws that ban mandatory union membership are called \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ while the process in which union and company management meet to negotiate a new labor contract is known as \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P. 216-217) *-RIGHT-TO-WORK LAWS / COLLECTIVE BARGAINING* **[MONEY, BANKING, AND FINANCIAL MARKETS]** 55\. Money that is backed up by gold or silver is called \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ money. (P. 176 -- 191) -*REPRESENTATIVE* 56\. Money that has value because a government has decreed that it is an acceptable means to pay debts is called \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ money. (P. 176 -- 191) *-FIAT* 57\. Name three facts about the Federal Reserve Board. (P. 238) *-IT HAS SEVEN MEMBERS* *-IT IS APPOINTED BY THE PRESIDENT AND CONFIRMED BY THE SENATE* *-SUPERVISES THE REGIONAL FEDERAL RESERVE BANKS* 58\. The Glass Steagall Act in 1933 \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. (P. 238) *-ESTABLISHED THE F.D.I.C., WHICH INSURED THE DEPOSITS OF BANK CUSTOMERS* 59\. Why was a \$700B bailout of banks needed in 2008? (P. 238) *-BANKS HAD BEEN LENDING TO HIGH-RISK BORROWERS* 60\. Name three facts about the Federal Open Market Committee? (P. 248) *-THEY MEET EIGHT TIMES PER YEAR TO DISCUSS AND DECIDE MONETARY POLICY* *-ITS MEMBERS INCLUDE 6 OF THE 12 DISTRICT BANK LEADERS* *-THEIR ACTIONS IMPACT CONSUMER INTEREST RATES* **[TAXES AND SPENDING]** 61\. An income tax in which high earners pay a greater percentage of their income than low earners would be a \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ tax. (P. 350) *-PROGRESSIVE* 62\. A sales tax in which everyone pays the same percentage would be a \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ tax. *-REGRESSIVE* 63\. According to the Tax Foundation, how many states have flat-rate personal income taxes? *-TWELVE* [[https://taxfoundation.org/blog/flat-tax-state-income-tax-reform/]](https://taxfoundation.org/blog/flat-tax-state-income-tax-reform/) 64\. Name three key characteristics of a tax. (P. 352) *-SIMPLICITY* *-EFFICIENCY* *-CERTAINTY* *-EQUITY* **[FINANCIAL LITERACY]** 65\. A \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ IS A POLICY FEATURE IN WHICH THE INSURED PAYS A FIXED AMOUNT FOR HEALTH CARE SERVICES. A \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ IS THE AMOUNT THAT THE POLICYHOLDER MUST PAY BEFORE THE INSURANCE COVERAGE KICKS IN. (P. PF28-31) *-CO-PAY / DEDUCTIBLE* 66\. \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ covers damage to your vehicle not caused by an accident (P. PF28-31) *-COMPREHENSIVE* 67\. Under an HMO medical insurance plan, what must one do before seeing a specialist doctor? (P. PF28-31) *-GET A REFERRAL FROM YOUR PRIMARY CARE PHYSICIAN* 68\. What should one consider in addition to premiums when evaluating car insurance? (P. PF28-31) *-CUSTOMER SERVICE* 69\. Name the three types of recommended insurance coverage for people in their 20s. (P. PF28-31) *-AUTO* *-RENTERS* *-HEALTH* 70\. After beginning his first career job, Stuart Dent decides to begin investing for retirement. What is the best source of information for him to learn about investing? *-BOOKS, NEWS, AND COMMENTARY ON PERSONAL FINANCE FROM DIFFERENT SOURCES* 71\. Five years after Stuart Dent began investing in stocks, his holdings have grown in value. However, due to massive overspending by the federal government, he is now concerned with inflation. Name two good investments to counter inflation. *-GOLD OR REAL ESTATE* 72\. Stuart Dent is twenty-three and is interested in building wealth for retirement. Wanda Smith is sixty-eight and wishes to have stable income. Which should invest in growth stocks and which should invest in dividend stocks? *-STUART SHOULD INVEST IN GROWTH STOCKS* *-WANDA SHOULD INVEST IN DIVIDEND STOCKS* 73\. The greater the \_\_\_\_\_\_\_\_\_, the greater the potential \_\_\_\_\_\_\_\_\_\_\_\_. *-RISK / RETURN* 74\. Evaluate the graph below. After fifteen years at three percent inflation, a \$10,000 investment would lose \_\_\_\_\_\_\_\_\_ of its value. *-FORTY PERCENT*  75\. What is the biggest driver of a nation's economic health? *-EDUCATIONAL LEVEL OF ITS CITIZENS* 76\. The biggest driver of federal government debt is \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_. *-GOVERNMENT FUNDED MEDICAL INSURANCE* 77\. Name three problems with high levels of government debt. *-THE POSSIBLITY OF HYPERINFLATION* *-OVER-RELIANCE ON FOREIGN CREDITORS / LOSS OF SOVEREIGNTY* *-ECONOMIC GROWTH LIMITED THROUGH HIGHER AND HIGHER INTEREST OBLIGATIONS* 78\. State the percentage of GDP in the United States that is spent on health care and defense. *-HEALTH CARE: 18.82% / DEFENSE 3.5%* [[https://data.worldbank.org/indicator/SH.XPD.CHEX.GD.ZS]](https://data.worldbank.org/indicator/SH.XPD.CHEX.GD.ZS) [[https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?locations=US]](https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?locations=US) 79\. What were the outcomes when Russia instituted a flat-rate income tax in 2001? *-GDP AND TAX REVENUE BOTH INCREASED* [[https://www.imf.org/external/pubs/ft/wp/2005/wp0516.pdf]](https://www.imf.org/external/pubs/ft/wp/2005/wp0516.pdf) 80\. TRUE or FALSE Effective political leaders can use government policy to override the laws of economics such as supply and demand, scarcity, and opportunity cost. *-FALSE*