ECO 201 Exam 1(Nova) 66 Questions with Verified Answers
Economics - CORRECT ANSWER the study of how society manages its scarce
resources
scarcity - CORRECT ANSWER the limited nature of society's resources
opportunity cost - CORRECT ANSWER whatever must be given up to obtain some
item
How People Make Decisions (4 Principles) - CORRECT ANSWER 1. People face
trade-offs
2. The cost of something is what you give up to get it
3. Rational people think at the margin
4. People respond to incentives
How people interact - CORRECT ANSWER 5. Trade can make everyone better off
6. Markets are usually a good way to organize economic activity
7. Governments can sometimes improve market outcomes
How the economy works as a whole - CORRECT ANSWER 8. A country's standard
of living depends on its ability to produce goods and services
9. Prices rise when the government prints too much money
10. Society faces a short-run trade-off between inflation and unemployment
Adam Smith's Invisible Hand - CORRECT ANSWER - takes all the information about
buyers and sellers into account
- guides everyone in the market to the best outcome
- economic efficiency
efficiency - CORRECT ANSWER the property of society getting the most it can from
its scarce resources
, equality - CORRECT ANSWER the property of distributing economic prosperity
uniformly among the members of society
rational people - CORRECT ANSWER people who systematically and purposefully
do the best they can to achieve their objectives
marginal change - CORRECT ANSWER a small incremental adjustment to a plan or
action
incentive - CORRECT ANSWER something the induces a person to act
market economy - CORRECT ANSWER an economy that allocates resources
through the decentralized decisions of many firms and households as they
interact in markets for goods and services
property rights - CORRECT ANSWER the ability of individual to own and exercise
control over scarce resources
market failure - CORRECT ANSWER a situation in which a market left on its own
fails to allocate resources efficiently
externality - CORRECT ANSWER the impact of one persons actions on the well-
being of a bystander
market power - CORRECT ANSWER the ability of a single economic actor(or small
group of actors) to have a substantial influence of market prices
productivity - CORRECT ANSWER the quantity of goods and services produced
from each unit of labor input
inflation - CORRECT ANSWER an increase in the overall level of prices in the
economy
business cycle - CORRECT ANSWER fluctuations in economic activity, such as
employment and production
Economics - CORRECT ANSWER the study of how society manages its scarce
resources
scarcity - CORRECT ANSWER the limited nature of society's resources
opportunity cost - CORRECT ANSWER whatever must be given up to obtain some
item
How People Make Decisions (4 Principles) - CORRECT ANSWER 1. People face
trade-offs
2. The cost of something is what you give up to get it
3. Rational people think at the margin
4. People respond to incentives
How people interact - CORRECT ANSWER 5. Trade can make everyone better off
6. Markets are usually a good way to organize economic activity
7. Governments can sometimes improve market outcomes
How the economy works as a whole - CORRECT ANSWER 8. A country's standard
of living depends on its ability to produce goods and services
9. Prices rise when the government prints too much money
10. Society faces a short-run trade-off between inflation and unemployment
Adam Smith's Invisible Hand - CORRECT ANSWER - takes all the information about
buyers and sellers into account
- guides everyone in the market to the best outcome
- economic efficiency
efficiency - CORRECT ANSWER the property of society getting the most it can from
its scarce resources
, equality - CORRECT ANSWER the property of distributing economic prosperity
uniformly among the members of society
rational people - CORRECT ANSWER people who systematically and purposefully
do the best they can to achieve their objectives
marginal change - CORRECT ANSWER a small incremental adjustment to a plan or
action
incentive - CORRECT ANSWER something the induces a person to act
market economy - CORRECT ANSWER an economy that allocates resources
through the decentralized decisions of many firms and households as they
interact in markets for goods and services
property rights - CORRECT ANSWER the ability of individual to own and exercise
control over scarce resources
market failure - CORRECT ANSWER a situation in which a market left on its own
fails to allocate resources efficiently
externality - CORRECT ANSWER the impact of one persons actions on the well-
being of a bystander
market power - CORRECT ANSWER the ability of a single economic actor(or small
group of actors) to have a substantial influence of market prices
productivity - CORRECT ANSWER the quantity of goods and services produced
from each unit of labor input
inflation - CORRECT ANSWER an increase in the overall level of prices in the
economy
business cycle - CORRECT ANSWER fluctuations in economic activity, such as
employment and production
