ECON 110 COMPREHENSIVE ANSWERS AND
QUESTIONS SET A+
✔✔study of how society manages its scare resources - ✔✔what is economics
✔✔1. study how people make decisions
2. study how people interact with one another
3. analyze the forces and trends that affect the economy as a whole - ✔✔what do
economists do
✔✔unified by several central ideas - ✔✔the study of economics has many facets, but it
is
✔✔people face trade-offs - ✔✔principle 1
✔✔trading off one goal against another - ✔✔making decisions requires what
✔✔guns and butter - ✔✔what is one classic trade-off
✔✔national defense and consumer goods - ✔✔what does guns and butter represent
✔✔society is getting the maximum benefits from its scare resources - ✔✔efficiency
✔✔those benefits are distributed uniformly among society's members - ✔✔equality
✔✔efficiency - ✔✔size of the economic pie
✔✔equality - ✔✔how the pie is divided into individual slices
✔✔acknowledging life's trade-offs - ✔✔how does the study of economics start
✔✔the cost of something is what you give up to get it - ✔✔principle 2
, ✔✔opportunity cost - ✔✔the value of the next best alternative you give up when making
a choice
✔✔rational people think at the margin - ✔✔principle 3
✔✔marginal change - ✔✔a small incremental adjustment to an existing plan of action
✔✔comparing marginal benefits and marginal costs - ✔✔how do rational people often
make decisions
✔✔the paradox of value - ✔✔why is water so cheap, while diamonds are so expensive
✔✔people respond to incentives - ✔✔principle 4
✔✔incentives - ✔✔something that motivates someone to do (or not to do) something
✔✔incentives - ✔✔what is the key to analyze how market work
✔✔trade can make everyone better off - ✔✔principle 5
✔✔trade - ✔✔allows each person to specialize in the activities they do best
✔✔markets are usually a good way to organize economic activity - ✔✔principle 6
✔✔market economies - ✔✔they had central planning before, and what did they develop
next
✔✔An Inquiry into the Nature and Causes of the Wealth of Nations (1776) - ✔✔what
book of Adam Smith made the most famous observation
✔✔household and firms interacting in markets act as if they are guided by an "invisible
hand" that leads them to desirable market outcomes - ✔✔most famous observation in
all of ecnomics
✔✔understand how this invisible hand works - ✔✔one of the goals in Economics
✔✔prices are the instrument - ✔✔what will you learn in which the invisible hand directs
economic activity
✔✔maximize the well-being of society as a whole - ✔✔these individuals buyers and
sellers reaches outcomes that
QUESTIONS SET A+
✔✔study of how society manages its scare resources - ✔✔what is economics
✔✔1. study how people make decisions
2. study how people interact with one another
3. analyze the forces and trends that affect the economy as a whole - ✔✔what do
economists do
✔✔unified by several central ideas - ✔✔the study of economics has many facets, but it
is
✔✔people face trade-offs - ✔✔principle 1
✔✔trading off one goal against another - ✔✔making decisions requires what
✔✔guns and butter - ✔✔what is one classic trade-off
✔✔national defense and consumer goods - ✔✔what does guns and butter represent
✔✔society is getting the maximum benefits from its scare resources - ✔✔efficiency
✔✔those benefits are distributed uniformly among society's members - ✔✔equality
✔✔efficiency - ✔✔size of the economic pie
✔✔equality - ✔✔how the pie is divided into individual slices
✔✔acknowledging life's trade-offs - ✔✔how does the study of economics start
✔✔the cost of something is what you give up to get it - ✔✔principle 2
, ✔✔opportunity cost - ✔✔the value of the next best alternative you give up when making
a choice
✔✔rational people think at the margin - ✔✔principle 3
✔✔marginal change - ✔✔a small incremental adjustment to an existing plan of action
✔✔comparing marginal benefits and marginal costs - ✔✔how do rational people often
make decisions
✔✔the paradox of value - ✔✔why is water so cheap, while diamonds are so expensive
✔✔people respond to incentives - ✔✔principle 4
✔✔incentives - ✔✔something that motivates someone to do (or not to do) something
✔✔incentives - ✔✔what is the key to analyze how market work
✔✔trade can make everyone better off - ✔✔principle 5
✔✔trade - ✔✔allows each person to specialize in the activities they do best
✔✔markets are usually a good way to organize economic activity - ✔✔principle 6
✔✔market economies - ✔✔they had central planning before, and what did they develop
next
✔✔An Inquiry into the Nature and Causes of the Wealth of Nations (1776) - ✔✔what
book of Adam Smith made the most famous observation
✔✔household and firms interacting in markets act as if they are guided by an "invisible
hand" that leads them to desirable market outcomes - ✔✔most famous observation in
all of ecnomics
✔✔understand how this invisible hand works - ✔✔one of the goals in Economics
✔✔prices are the instrument - ✔✔what will you learn in which the invisible hand directs
economic activity
✔✔maximize the well-being of society as a whole - ✔✔these individuals buyers and
sellers reaches outcomes that
