Eco 201 exam 1(nova) Questions and Answers 100% Pass

Eco 201 exam 1(nova) Questions and Answers 100% Pass economics - the study of how society manages its scarce resources scarcity - the limited nature of society's resources opportunity cost - whatever must be given up to obtain some item How People Make Decisions (4 Principles) - 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 - 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 - 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 EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 2 10. Society faces a short-run trade-off between inflation and unemployment Adam Smith's Invisible Hand - - takes all the information about buyers and sellers into account - guides everyone in the market to the best outcome - economic efficiency 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 rational people - people who systematically and purposefully do the best they can to achieve their objectives marginal change - a small incremental adjustment to a plan or action incentive - something the induces a person to act market economy - 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 - the ability of individual to own and exercise control over scarce resources EMILY CHARLENE © 2025, ALL RIGHTS RESERVED 3 market failure - a situation in which a market left on its own fails to allocate resources efficiently externality - the impact of one persons actions on the well-being of a bystander market power - the ability of a single economic actor(or small group of actors) to have a substantial influence of market prices productivity - the quantity of goods and services produced from each unit of labor input inflation - an increase in the overall level of prices in the economy business cycle - fluctuations in economic activity, s