Questions and Answers
What is the definition of a market economy?
An economy where decisions about production and consumption are made by individual producers and consumers
What is the main difference between a market economy and a command economy?
In a market economy, there is a central authority making decisions, while in a command economy, decisions are made by individual producers and consumers
According to Principle #1 of economics, why are choices necessary?
Because resources are scarce and cannot satisfy all the ways society wants to use them
What is considered the true cost of something according to economics?
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Which branch of economics studies how people make decisions and how these decisions interact?
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What concept describes the way individual pursuit of self-interest can benefit society as a whole?
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What is the purpose of the Production Possibility Frontier model?
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What does economic growth result in, according to the text?
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What is opportunity cost defined as in the text?
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Inefficient allocation in an economy means:
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What does a country have if its opportunity cost of producing a good is lower than other countries'?
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Which model provides a clear illustration of the gains from trade?
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What is the purpose of the Circular Flow Diagram according to the text?
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What is the main focus of 'marginal decisions' discussed in the text?
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What defines an 'incentive'?
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How do markets usually reach equilibrium, as per Principle #6?
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What is the main concept behind 'specialization' in the context of trade?
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How do government policies intervene when markets fail to achieve efficiency?
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What is the consequence of high overall spending in an economy, as described in Principle #11?
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In economics, what does 'model' refer to?
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'Equilibrium' in markets means:
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How do people usually respond to incentives according to the text?
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What is the main concept behind 'Mareginal Analysis' as discussed in the text?
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