Questions and Answers
What is the marginal benefit equal to when spending additional units of a particular resource?
Classify the following resources as scarce or plentiful:
Coal = Scarce Resource Sunlight = Plentiful Resource Oil = Scarce Resource Electricity = Scarce Resource Seawater = Plentiful Resource Wind = Plentiful Resource
What is Ben's incentive for choosing a salad for dinner?
To eat a healthier meal
What is the opportunity cost of Nick's trip?
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In a communist economy, all economic activities are controlled by __________.
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What made Southern Brewers lower its prices?
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What effect will the tax increase have on savings and investment in the economy?
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Match each economic activity with the correct economic term:
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Who introduced the concept of laissez-faire?
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Laissez-faire, which means __________ government interference in the functioning of an economy.
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Which sentences describe two government policies that liberalize the economy?
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What feature is characteristic of a market economy?
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Which type of economy does Linda's scenario describe?
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What defines equilibrium in a graph showing demand and supply curves?
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Which of the following are non-price determinants of demand?
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Which statements are true according to the law of demand?
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What defines an externality?
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Study Notes
Economic Concepts and Terms
- Marginal Benefit and Cost: People continue to allocate resources until their marginal benefit equals marginal cost.
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Scarcity vs. Plentiful Resources:
- Scarce: coal, oil, electricity
- Plentiful: seawater, wind, sunlight
Decision-Making Incentives
- Choice Motivation: Choosing a salad for dinner suggests Ben's incentive is to consume a healthier meal.
- Opportunity Cost: For Nick, the cost of saving for his overseas trip is the bike and watch he forgoes, with the gaming console representing the primary opportunity cost.
Economic Systems
- Communist Economy: In such economies, the government controls all economic activities, also known as command economies.
- Market Competition: Introduction of competitors leads to price reductions; Southern Brewers lowers prices in response to competition from Albert Coffee and Café Brites.
Impact of Taxes
- Effects of Increased Tax Rates: Higher taxes can decrease personal savings while simultaneously increasing overall investment in the economy.
Economic Activities and Terminology
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Incentives and Economic Activities:
- Washing a car for $5 correlates with the incentive of earning.
- Taxation involves paying a portion of income to the government.
- Purchasing decisions indicate injections and leakages in the economy.
Historical Economic Principles
- Laissez-Faire Concept: Introduced by Adam Smith, advocating minimal government interference in economic activities.
Government Policies
- Liberalizing Measures: Examples include reducing tariffs on imports and establishing tax-free special economic zones.
Market Economy Characteristics
- Motivation Factors: Self-interest is a key motivating force for buyers in a market economy.
Equilibrium in Supply and Demand
- Equilibrium Definition: The intersection point of demand and supply curves on a graph signifies market equilibrium.
Demand Determinants
- Non-Price Influencers: These include advertising, changes in population, and production technology, affecting demand independently of price changes.
Law of Demand
- Demand Relationships: As prices increase, the quantity demanded decreases, and vice versa, highlighting the inverse relationship of price and demand.
Externalities
- Definition: Externalities refer to effects of production and consumption on third parties not directly involved in the transaction, impacting overall societal welfare.
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Description
Test your understanding of key economic concepts such as marginal benefit, opportunity cost, and the differences between economic systems. This quiz covers decision-making incentives and the impact of taxes on economic behavior. Perfect for anyone looking to sharpen their knowledge in economics.
