Marginal Benefit and Costs Quiz: Incentives Matter

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25 Questions

According to the passage, what would motivate a person to take a particular course of action?

Incentives

What is the cornerstone of modern life, according to Levitt and Dubner?

Incentives

What does the principle 'Trade Makes People Better Off' suggest?

It is advantageous to focus on what we do best and then trade with others.

According to the passage, what is an example of a negative incentive?

Fines and jail time used by governments

What does the principle 'Markets Coordinate Trade' emphasize?

Markets bring buyers and sellers together to do business with each other.

What is the key message of the quote, 'Most of economics can be summarized in four words: People respond to incentives'?

People's behavior can be influenced by incentives.

What is the first principle of an economic way of thinking?

Scarcity Forces Tradeoffs

According to the first principle, what are people forced to do as a result of limited resources?

Face tradeoffs and make choices

What do economists call the scarcity-forces-tradeoffs principle?

The no-free-lunch principle

What does the first principle emphasize about resources and desires?

Unlimited desires for limited resources

What do limited resources force people to do?

Face tradeoffs and make choices

What is the central idea behind the first principle of an economic way of thinking?

Scarcity forces tradeoffs in resource allocation

What does the scarcity-forces-tradeoffs principle imply?

There is no such thing as free lunch, as every choice involves tradeoffs.

What does the costs-versus-benefits principle tell us?

People choose something when the benefits exceed the costs.

How does the thinking-at-the-margin principle impact everyday choices?

It involves thinking in terms of a little more or a little less of something.

What is the main consideration in making a choice according to the scarcity-forces-tradeoffs principle?

Costs and benefits

How does the scarcity-forces-tradeoffs principle come into play when choosing between pitching a tent or renting a motel room during a road trip?

By comparing the costs and benefits of each arrangement

What is the significance of making decisions at the margin according to the text?

It involves adding or subtracting one more unit of something rather than making wholesale changes.

What principle states that markets usually do better than anyone or anything else at coordinating exchanges between buyers and sellers?

The invisible hand principle

What did Adam Smith use the metaphor of an invisible hand to explain?

The coordination of exchanges between buyers and sellers

What separates the good economist from the bad, according to economist Henry Hazlitt?

Looking at the direct consequences of a proposed course

What does the law of unintended consequences state?

Actions always have effects that are not expected

What is a consequence of being shortsighted in decision making?

Considering only immediate costs and benefits

What was the result of Vermont's law that banned roadside billboards, according to the text?

Businesses built sculptures to attract passersby

What type of decision-making did the text encourage people to consider?

Long-term decision-making

Test your understanding of the principle that people respond to incentives in generally predictable ways. Explore the concept of marginal benefit, added costs in time and money, and how they influence decision-making.

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