What are the 5 foundations of Economics? - ANS >> 1. Incentives - change how people behave
2. trade-offs - With limited resources, people have to make choices
3. opportunity cost- Every time a decision is made something has to be given up
4. marginal thinking- how does the additional b...
ECON 211 Exam 1 Questions & Complete
Solutions 2024/2025
What are the 5 foundations of Economics? - ANS >> 1. Incentives - change how
people behave
2. trade-offs - With limited resources, people have to make choices
3. opportunity cost- Every time a decision is made something has to be given up
4. marginal thinking- how does the additional benefit compare to the additional cost?
5. trade creates value
What is the 2 divisions of economics? - ANS >> macroeconomics and
microeconomics
What is Economics? - ANS >> the study of how indivdiuals and societies allocate their
limited resources to satisfy their practically unlimited wants (social science that studies
how people behave)
What is scarcity? - ANS >> The inherently limited nature of society's resources, given
society's unlimited wants and needs
true or false economics seeks to answer how individuals and societies make decisions
about scarce resources. - ANS >> true
What is the difference between macroeconomics and microeconomics? - ANS >>
Micro- study of individual units that make up economy. focus on individuals, businesses,
industries
Macro- Study of overall aspects and workings of an economy "big picture"
What is Incentives? what are they used for? - ANS >> Factors that motivate you to act
or exert effort
used to affect how people respond
What are positive incentives ? - ANS >> Encourage action by offering rewards of
payments
What are negative incentives? - ANS >> Discourage action by providing undesirable
consequences or punishments
What are direct incentives? - ANS >> Easy to recognize
here is what i want you to do and here is what i am going to do in order to get you to do
it
What are indirect incentives ? - ANS >> Hard to recognize
A secondary change in behavior brought on by the original incentive
, What are unintended consequences? - ANS >> an unplanned result (usually negative
and unwanted) of an incentive
Ex: with government policy, policymakers how to figure out how to balance the benefits
brought on by policy with potential unintended consequences
What is a trade-off? - ANS >> the alternative you face if you decide to do one thing
rather than another
-*With scarce resources people have to choose some things over others*
-Doing one thing often means you will not have the time, resources, or energy to do
something else
*every decision incurs a cost*
What is opportunity cost? - ANS >> the highest valued alternative that must be
sacrificed to get something else
True or false the best possible decision is the one that minimizes the opportunity cost -
ANS >> True
What economic thinking ? what does it require? - ANS >> A purposeful evaluation of
the available opportunities to make the best decision possible
Marginal thinking
What is marginal thinking? - ANS >> Evaluating whether the benefit of one more unit
of something is greater than its cost
What is the marginal benefit? - ANS >> Additional benefit derived from extra unit
what is marginal cost? - ANS >> Additional cost incurred from extra unit
What is trade? - ANS >> the voluntary exchange of goods and services between 2 or
more parties
Trade creates ___ - ANS >> Value
True or false without trade you have to produce everything you consume - ANS >>
true
what does trade foster? - ANS >> the exchange of goods and promotes specialization
What is comparative advantage? - ANS >> The situation in which an individual,
business, or country can produce at a lower opportunity cost than a competitor
Markets facilitate ____ - ANS >> Trading
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