ECO 201 Exam 1 University of
Kentucky- Hoyt Questions and
Answers 100% Pass
economics - ✔✔the study of the choices that individuals make given the presence of
scarcity
scarcity - ✔✔limited resources but unlimited wants
types of resources (a.k.a. factors of production) - ✔✔1. land: natural resources
2. nonhuman and animal resources: leather, meat, fur
3. labor: human capital (physical and mental)
4. capital: resources produced using land and labor to make other things
5. technology: always changing, but still scarce
6. entrepreneurial ability: knowledge/willingness to take a chance to make things
happen
*these are combined to produce commodities: economic goods and services*
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
,the ten (eight) principles of economics - ✔✔1. people face trade-offs: scarcity forces us to
make choices
2. the cost of something is what you give up to get it
3. rational people weigh costs and benefits and think and the margin
4. people respond to incentives (in predictable ways)
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
opportunity cost - ✔✔highest value benefit forgone due to choosing an alternative
the three economic questions - ✔✔1. what and how much to produce?
2. how to produce?
3. for whom to produce?
the economy - ✔✔the institutional structure through which individuals in a society
coordinate their diverse wants
efficiency - ✔✔the property of society getting the most it can from its scarce resources
(size of the economic pie)
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
, equality - ✔✔the property of distributing economic prosperity uniformly among the
members of society (how the economic pie is sliced)
sunk cost - ✔✔a cost that has already been incurred and cannot be recovered
economically rational - ✔✔it is rational if you weigh the costs and benefits
marginal thinking - ✔✔requires decision-makers to evaluate whether the benefit of one
more unit of something is greater than its cost
marginal analysis - ✔✔analysis that involves comparing marginal benefits and marginal
costs
the economic decision rule - ✔✔if the marginal benefit is greater than the marginal cost
do it
we do things to the point where...? - ✔✔marginal benefit=marginal cost
five facts about trade - ✔✔1. trade is not a zero-sum game
2. by channeling goods and resources to those who value them most, *trade creates
value* and increases the wealth created by society's resources
3. transaction costs can inhibit trade
4. the middleman reduces costs
5. as trade restrictions are lifted, more value is created from trade
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
Kentucky- Hoyt Questions and
Answers 100% Pass
economics - ✔✔the study of the choices that individuals make given the presence of
scarcity
scarcity - ✔✔limited resources but unlimited wants
types of resources (a.k.a. factors of production) - ✔✔1. land: natural resources
2. nonhuman and animal resources: leather, meat, fur
3. labor: human capital (physical and mental)
4. capital: resources produced using land and labor to make other things
5. technology: always changing, but still scarce
6. entrepreneurial ability: knowledge/willingness to take a chance to make things
happen
*these are combined to produce commodities: economic goods and services*
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 1
,the ten (eight) principles of economics - ✔✔1. people face trade-offs: scarcity forces us to
make choices
2. the cost of something is what you give up to get it
3. rational people weigh costs and benefits and think and the margin
4. people respond to incentives (in predictable ways)
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
opportunity cost - ✔✔highest value benefit forgone due to choosing an alternative
the three economic questions - ✔✔1. what and how much to produce?
2. how to produce?
3. for whom to produce?
the economy - ✔✔the institutional structure through which individuals in a society
coordinate their diverse wants
efficiency - ✔✔the property of society getting the most it can from its scarce resources
(size of the economic pie)
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2
, equality - ✔✔the property of distributing economic prosperity uniformly among the
members of society (how the economic pie is sliced)
sunk cost - ✔✔a cost that has already been incurred and cannot be recovered
economically rational - ✔✔it is rational if you weigh the costs and benefits
marginal thinking - ✔✔requires decision-makers to evaluate whether the benefit of one
more unit of something is greater than its cost
marginal analysis - ✔✔analysis that involves comparing marginal benefits and marginal
costs
the economic decision rule - ✔✔if the marginal benefit is greater than the marginal cost
do it
we do things to the point where...? - ✔✔marginal benefit=marginal cost
five facts about trade - ✔✔1. trade is not a zero-sum game
2. by channeling goods and resources to those who value them most, *trade creates
value* and increases the wealth created by society's resources
3. transaction costs can inhibit trade
4. the middleman reduces costs
5. as trade restrictions are lifted, more value is created from trade
EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3
