ECO 201 Hoyt Chapter 1-4 Terms
(Exam 1) Questions and Answers
100% Pass
Economics - ✔✔The study of the choices that individuals make given the presence of
scarcity
Scarcity - ✔✔the limited resources but unlimited wants
Types of resources - ✔✔land, nonhuman animal resources, labor, capital, technology,
entrepreneurial ability
Land - ✔✔Water, air, oil, land, natural resources
nonhuman animal resources - ✔✔cows, pigs, chickens, etc.
labor - ✔✔human capital (physical and mental)
capital - ✔✔resources produced using land and labor (man-made)
technology - ✔✔Application of science to help people
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,entrepreneurial ability - ✔✔the imagination required to develop a new product or
process, the skill needed to organize production, and the willingness to take the risk of
profit or loss
the economy - ✔✔the institutional structure through which individuals in a society
coordinate their diverse wants
the economy will determine the answers to three things - ✔✔1) what, and how much to
produce
2) how to produce
3) for whom to produce
efficiency - ✔✔the property of society getting the most it can from its scarce resources
equality - ✔✔the property of distributing economic prosperity uniformly among the
members of society
oppurtunity cost - ✔✔highest valued benefit forgone due to choosing an alternative
(not the sum of all forgone activities)
the 10 principles of economics - ✔✔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
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, 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
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
goods and services - ✔✔the objects (goods) and the actions (services) that people value
and produce to satisfy human wants
rational people - ✔✔systematically and purposefully do the best they can to achieve
their objectives
sunk cost - ✔✔has already been incurred and can't be recovered
the economic decision rule - ✔✔If the marginal benefits of doing something exceed the
marginal costs, do it. If the marginal costs of doing something exceed the marginal
benefits, don't do it.
economically rational - ✔✔things that are economically safe and make sense
marginal thinking - ✔✔requires decision-makers to evaluate whether the benefit of one
more unit of something is greater than its cost
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
(Exam 1) Questions and Answers
100% Pass
Economics - ✔✔The study of the choices that individuals make given the presence of
scarcity
Scarcity - ✔✔the limited resources but unlimited wants
Types of resources - ✔✔land, nonhuman animal resources, labor, capital, technology,
entrepreneurial ability
Land - ✔✔Water, air, oil, land, natural resources
nonhuman animal resources - ✔✔cows, pigs, chickens, etc.
labor - ✔✔human capital (physical and mental)
capital - ✔✔resources produced using land and labor (man-made)
technology - ✔✔Application of science to help people
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
,entrepreneurial ability - ✔✔the imagination required to develop a new product or
process, the skill needed to organize production, and the willingness to take the risk of
profit or loss
the economy - ✔✔the institutional structure through which individuals in a society
coordinate their diverse wants
the economy will determine the answers to three things - ✔✔1) what, and how much to
produce
2) how to produce
3) for whom to produce
efficiency - ✔✔the property of society getting the most it can from its scarce resources
equality - ✔✔the property of distributing economic prosperity uniformly among the
members of society
oppurtunity cost - ✔✔highest valued benefit forgone due to choosing an alternative
(not the sum of all forgone activities)
the 10 principles of economics - ✔✔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
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
, 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
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
goods and services - ✔✔the objects (goods) and the actions (services) that people value
and produce to satisfy human wants
rational people - ✔✔systematically and purposefully do the best they can to achieve
their objectives
sunk cost - ✔✔has already been incurred and can't be recovered
the economic decision rule - ✔✔If the marginal benefits of doing something exceed the
marginal costs, do it. If the marginal costs of doing something exceed the marginal
benefits, don't do it.
economically rational - ✔✔things that are economically safe and make sense
marginal thinking - ✔✔requires decision-makers to evaluate whether the benefit of one
more unit of something is greater than its cost
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
