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ECON 2110 Exam 1 Questions And Answers
1. Scarce: there isn't enough to satisfy all of our wants
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2. Great economic problem: how to arrange scarce resources to satisfy as many of
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our wants as possible
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3. opportunity cost: value of the opportunities lost. Ex. Opportunity cost of attend-
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qing clemson is the money you could have earned while working
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4. Principle 1: Incentives matter: - People make choices in response to the bene-
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qfits and costs presented by those decisions
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- As the benefits and/or costs of a decision change, (some) people change what they do
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5. Principle 2: Life consists of trade-offs: - q q q q q q
qFundamental implication of scarcity: you want more of "X" you give up some of "Y"
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- The true cost of anything is what you must give up to get it
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6. Principle 3: Rational people make choices at the margin: -
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They consider the benefits and costs of a particular action.
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- They act only when the marginal (additional) benefits exceed the marginal (addi-
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qtional) costs q
7. Principle 4:Trade makes people better off: - q q q q q q q
Trade is a voluntary activity: people only trade if they expect to be made better off.
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-Trade moves goods from lower value to higher value uses
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8. Surplus: - Gains from trade q q q q
- If I own a baseball card I value at $5 and you value at $10, a trade c bot an make us
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h better off nd the value of the card rises from $5 to $10
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- surplus of above example is $5 q q q q q
9. Principle 5: Good institutions align "self interest" with the "social interest": -
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qGood institutions make themselves better off by also making others better off
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- Bad institutions make themselves better off by making others worse off
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10. Positive Statement: addresses the consequences of an action
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11. Normative Statement: expresses a value judgement q q q q q
12. Marginal: additional q
13. Marginal Principle: If the marginal benefits (MB) e the marginal costs (MC), do it!
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If not, don't.
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14. What are some of the marginal costs of attending a Clemson game?: -
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The ticket to the game you purchase
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- Studying on that day q q q
1q/q7
, ECON 2110 Exam 1
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15. Marginal cost example: - Let's say Bob is at Todaro's $1 slice n
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- What's Bob's marginal cost of the first slice?
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- How about the second?
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- Third?
2q/q7
Studyqonlineqatqhttps://quizlet.com/_c1s3c5
ECON 2110 Exam 1 Questions And Answers
1. Scarce: there isn't enough to satisfy all of our wants
q q q q q q q q q
2. Great economic problem: how to arrange scarce resources to satisfy as many of
q q q q q q q q q q q q q
our wants as possible
q q q
3. opportunity cost: value of the opportunities lost. Ex. Opportunity cost of attend-
q q q q q q q q q q q
qing clemson is the money you could have earned while working
q q q q q q q q q q
4. Principle 1: Incentives matter: - People make choices in response to the bene-
q q q q q q q q q q q q
qfits and costs presented by those decisions
q q q q q q
- As the benefits and/or costs of a decision change, (some) people change what they do
q q q q q q q q q q q q q q
5. Principle 2: Life consists of trade-offs: - q q q q q q
qFundamental implication of scarcity: you want more of "X" you give up some of "Y"
q q q q q q q q q q q q q q
- The true cost of anything is what you must give up to get it
q q q q q q q q q q q q q
6. Principle 3: Rational people make choices at the margin: -
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They consider the benefits and costs of a particular action.
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- They act only when the marginal (additional) benefits exceed the marginal (addi-
q q q q q q q q q q q
qtional) costs q
7. Principle 4:Trade makes people better off: - q q q q q q q
Trade is a voluntary activity: people only trade if they expect to be made better off.
q q q q q q q q q q q q q q q q
-Trade moves goods from lower value to higher value uses
q q q q q q q q q
8. Surplus: - Gains from trade q q q q
- If I own a baseball card I value at $5 and you value at $10, a trade c bot an make us
q q q q q q q q q q q q q q q q q q q q
h better off nd the value of the card rises from $5 to $10
q q q q q q q q q q q q q
- surplus of above example is $5 q q q q q
9. Principle 5: Good institutions align "self interest" with the "social interest": -
q q q q q q q q q q q
qGood institutions make themselves better off by also making others better off
q q q q q q q q q q q
- Bad institutions make themselves better off by making others worse off
q q q q q q q q q q
10. Positive Statement: addresses the consequences of an action
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11. Normative Statement: expresses a value judgement q q q q q
12. Marginal: additional q
13. Marginal Principle: If the marginal benefits (MB) e the marginal costs (MC), do it!
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If not, don't.
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14. What are some of the marginal costs of attending a Clemson game?: -
q q q q q q q q q q q q
The ticket to the game you purchase
q q q q q q q
- Studying on that day q q q
1q/q7
, ECON 2110 Exam 1
q q q
Studyqonlineqatqhttps://quizlet.com/_c1s3c5
15. Marginal cost example: - Let's say Bob is at Todaro's $1 slice n
q q q q q q q q q q q q ight
- What's Bob's marginal cost of the first slice?
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- How about the second?
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- Third?
2q/q7
