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
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, 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 2
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 1
, 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 2
