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Questions and Answers
What is the fundamental idea behind the concept of marginal thinking?
What is the fundamental idea behind the concept of marginal thinking?
- Considering the total cost of a decision
- Making choices based on emotional responses
- Weighing the additional benefits and costs of a change (correct)
- Always choosing the option with the lowest upfront cost
Which of the following best describes the principle of opportunity cost?
Which of the following best describes the principle of opportunity cost?
- The notion that people face trade-offs in life
- The idea that people respond to incentives
- The cost of something is what you give up to get it (correct)
- The concept that people think at the margin
What is the underlying assumption behind the principle that people respond to incentives?
What is the underlying assumption behind the principle that people respond to incentives?
- People are driven by emotions rather than rational thought
- People make decisions based on impulse rather than careful consideration
- People are inherently selfish and only care about their own interests
- People are motivated by the desire to maximize their well-being (correct)
Which principle of economics suggests that individuals must give up one thing to get another?
Which principle of economics suggests that individuals must give up one thing to get another?
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What is the key characteristic of rational decision-making in economics?
What is the key characteristic of rational decision-making in economics?
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Study Notes
Principles of Economics
- The principle of economics that suggests rational people think at the margin is C Rational people think at the margin.
- This means that rational people make decisions based on the additional benefits and costs of an action, rather than the total costs and benefits.
- A People face trade-offs is a principle that suggests that every decision involves giving up something else that is valued.
- B The cost of something is what you give up to get it is a principle that defines the concept of opportunity cost.
- D People respond to incentives is a principle that states that people alter their behavior in response to changes in the incentives they face.
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