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Questions and Answers
The Incentive Principle explains that a rational person will participate in more of an activity if:
The Incentive Principle explains that a rational person will participate in more of an activity if:
According to the Incentive Principle, when the marginal cost of an activity increases, a rational person will:
According to the Incentive Principle, when the marginal cost of an activity increases, a rational person will:
A self-interested individual makes decisions based on:
A self-interested individual makes decisions based on:
Which of the following scenarios is NOT a good example of how a self-interested individual might make a decision?
Which of the following scenarios is NOT a good example of how a self-interested individual might make a decision?
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The Incentive Principle helps to explain why people respond to changes in:
The Incentive Principle helps to explain why people respond to changes in:
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A professional athlete who chooses to quit their sport for a less demanding job, despite earning a lower salary, is likely motivated by:
A professional athlete who chooses to quit their sport for a less demanding job, despite earning a lower salary, is likely motivated by:
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If the cost of attending a college increases, we would expect:
If the cost of attending a college increases, we would expect:
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A self-interested individual is motivated by:
A self-interested individual is motivated by:
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What is the primary focus of microeconomics?
What is the primary focus of microeconomics?
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What does the Cost-Benefit Principle suggest?
What does the Cost-Benefit Principle suggest?
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Which statement best describes a positive statement?
Which statement best describes a positive statement?
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What occurs as a result of scarcity?
What occurs as a result of scarcity?
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What does Adam's emotional response suggest about his character?
What does Adam's emotional response suggest about his character?
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What is the Economic Surplus for Alex after attending the comedy show?
What is the Economic Surplus for Alex after attending the comedy show?
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Which term describes the total economic surplus?
Which term describes the total economic surplus?
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What characterizes normative statements?
What characterizes normative statements?
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How is marginal cost defined?
How is marginal cost defined?
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What characterizes a rational decision maker?
What characterizes a rational decision maker?
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Under what condition should a rational decision maker take action?
Under what condition should a rational decision maker take action?
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What is a common misconception about normative statements?
What is a common misconception about normative statements?
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What did Milton Friedman believe about Mother Theresa?
What did Milton Friedman believe about Mother Theresa?
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Which of the following is an example of a positive statement?
Which of the following is an example of a positive statement?
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What action did Armen Alchain and Gordon Tullock advocate in their letter to FDR?
What action did Armen Alchain and Gordon Tullock advocate in their letter to FDR?
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What can be concluded about Paula's decision to see 8 movies based on her Marginal Benefit and Marginal Cost?
What can be concluded about Paula's decision to see 8 movies based on her Marginal Benefit and Marginal Cost?
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Which branch of economics focuses on individual decision-makers and their interactions?
Which branch of economics focuses on individual decision-makers and their interactions?
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What best describes a 'Self-Interested' person?
What best describes a 'Self-Interested' person?
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When considering government policies, which factor should decision makers recognize?
When considering government policies, which factor should decision makers recognize?
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What kind of marginal benefit appears to characterize Ann's iced coffee consumption?
What kind of marginal benefit appears to characterize Ann's iced coffee consumption?
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At a cost of $2.25 per cup, how many cups of iced coffee should Ann consume to maximize her benefit?
At a cost of $2.25 per cup, how many cups of iced coffee should Ann consume to maximize her benefit?
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Which of the following arguments regarding automobile safety is considered less effective?
Which of the following arguments regarding automobile safety is considered less effective?
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Which statement about raising the minimum wage is typically supported?
Which statement about raising the minimum wage is typically supported?
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Study Notes
Foundations of Economics
- Economics is the social science that studies how people make decisions when resources are limited. It considers both individual and societal impacts of these decisions.
- Scarcity is a fundamental economic concept where limited resources force tradeoffs.
- Tradeoffs occur because obtaining more of one thing often means foregoing some amount of another.
- Microeconomics focuses on individual decision makers (like households and firms) and their interactions.
- Macroeconomics looks at the overall economy, including measures like inflation, unemployment, and GDP growth.
- Positive statements describe the world as it is, focusing on facts and data.
- Normative statements express opinions about how the world should be, often incorporating values and judgments.
- A rational decision maker acts to achieve a well-defined goal by making choices that maximize benefits and minimize costs.
- Total Benefits are the overall gains from an action.
- Total Costs are the overall burdens associated with an action.
- Total Economic Surplus represents the difference between total benefits and total costs.
- The Cost-Benefit Principle suggests an activity should be pursued if the additional benefits outweigh the additional costs.
- Marginal Benefit is the change in total benefits from undertaking one additional unit of an activity.
- Marginal Cost is the change in total costs from undertaking one more unit of the activity.
- The Incentive Principle highlights that a rational decision maker will adjust their behavior if the associated costs or benefits change.
Multiple Choice Questions (Examples)
- Incentive Principle: An action should be taken if its additional benefits are at least as great as its additional costs.
- Economic Surplus: The difference between the total benefits and total costs of an action.
- Rational Decision-Maker: A person always strives to maximize benefits and minimize costs from a decision.
Additional Concepts (Examples)
- Self-Interested Individual: A person who considers their own benefits and costs when making decisions.
- Normative Statements: Statements that express opinions or judgments about how the world should be. They often incorporate values.
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Description
Explore the fundamental concepts of economics, including scarcity, tradeoffs, and the distinction between microeconomics and macroeconomics. This quiz will test your understanding of key economic principles and the different types of statements in economics, such as positive and normative statements.
