Unit 1: Basic Economic Concepts
Micro · Unit 1 · Paper 2

Basic Economic Concepts unit test

A test on this unit alone, marked as a percentage and a letter grade — for the test your class is actually sitting, rather than for May. Answer everything, then submit once: seeing the answer to question 3 before attempting question 4 makes the final percentage meaningless.

Paper 1Paper 2Paper 3
Each paper is built from this unit’s 24 terms and is the same for everyone, so a teacher can assign “Unit 1, Paper 2” and every student sits the identical test. Multiple choice is marked objectively; the written sections you mark yourself against the model answer and rubric.
Suggested time 34 min 31 points0/17 attempted
1

Ceteris paribus

2

Economic vs accounting profit

3

Utility

4

Calculating opportunity cost from an output table

5

Explicit vs implicit costs

6

Comparative advantage

7

Normal profit

8

Why the PPC bows outward

9

Marginal benefit

10

Opportunity cost

11

Marginal analysis

12

Positive vs normative statements

Short answer 1. Define or explain: Terms of trade

3 pts

Short answer 2. Define or explain: Utility-maximizing rule

3 pts

Short answer 3. Define or explain: Productive efficiency

3 pts

Short answer 4. Define or explain: Rational self-interest

3 pts

Free response

7 pts

This course has no free-response prompt tagged to this unit, so one from elsewhere in the course is used. It is still worth writing — the skill transfers.

A profit-maximizing firm operates in a perfectly competitive market for wheat. The market is currently in long-run equilibrium.

Draw a correctly labeled side-by-side graph for the wheat market and the individual firm, showing price, output, and average total cost (ATC).

A new medical study is published revealing immense health benefits of consuming wheat. On your graphs, show the short-run effect of this study on market price, market quantity, firm price, and firm quantity. Shade the area of the firm's short-run economic profit.

Explain what will happen to the number of firms in this market in the long run, and how that will affect the market price and the individual firm's economic profit.