Economics Test 1 Review

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Questions and Answers

What is the study of how people allocate scarce resources for production, distribution, and consumption both individually and collectively?

  • Microeconomics
  • Economics (correct)
  • Scarcity Forces
  • Macroeconomics

Which principle of economics states that all resources are limited?

  • Thinking at the Margin
  • Markets Facilitate Trades
  • Scarcity Forces and Tradeoffs (correct)
  • Incentives Matter

What is the careful management of available resources in terms of the production and consumption of goods and services?

  • Costs Vs Benefits
  • Scarcity
  • Trade Offs
  • The Economy (correct)

Which term refers to what you spend when you make a choice (time, resources, money)?

<p>Costs (C)</p> Signup and view all the answers

Which principle of economics emphasizes that trade makes people better off?

<p>Trade Makes People Better Off (A)</p> Signup and view all the answers

What concept captures the scarcity and opportunity cost of choices when faced with the possibility of producing two goods or services?

<p>Opportunity cost (B)</p> Signup and view all the answers

In which type of economy does the government have little or no interference?

<p>Laissez Faire Economy (A)</p> Signup and view all the answers

According to Adam Smith, what motivates people in a free market economy?

<p>Self-interest (A)</p> Signup and view all the answers

What is the main advantage of a free market economy?

<p>More choices (D)</p> Signup and view all the answers

How does trade contribute to economic efficiency?

<p>By allowing specialization and exchange (C)</p> Signup and view all the answers

What is the main focus of microeconomics?

<p>How individuals, businesses, and households make decisions (A)</p> Signup and view all the answers

Which principle of economics emphasizes the concept that people have to give up something in order to get something else?

<p>Scarcity Forces and Tradeoffs (A)</p> Signup and view all the answers

What do economists mean when they talk about 'Thinking at the Margin'?

<p>Assessing what you gain by adding one unit of something (D)</p> Signup and view all the answers

What is the main difference between microeconomics and macroeconomics?

<p>Microeconomics focuses on individual decision-making, while macroeconomics looks at the entire economy (B)</p> Signup and view all the answers

What concept captures the idea that every choice requires tradeoffs?

<p>Scarcity Forces and Tradeoffs (A)</p> Signup and view all the answers

What is the opportunity cost of switching from making one set of things to making another set of things efficiently?

<p>How much of one thing you have to give up to get more of the other thing (B)</p> Signup and view all the answers

Which term describes the specialization of the labor force in which large jobs are broken down into many specialized jobs?

<p>Labor division (C)</p> Signup and view all the answers

What does the PPF model capture?

<p>Scarcity and the opportunity cost of choices when producing goods or services (C)</p> Signup and view all the answers

In terms of economics, what does the term 'allocative efficiency' refer to?

<p>Devoting resources toward their best or optimal ends (C)</p> Signup and view all the answers

What is the main reason why trade can be helpful according to the text?

<p>It leads to more choices for consumers (A)</p> Signup and view all the answers

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