Econ 202 Exam 1 Questions with Complete Correct Answers | Grade A+

scarcity Ans: a situation in which unlimited wants exceeds the limited resources available economics Ans: the study of the choices people make to attain their goals, given their scarce resources economic model Ans: a simplified version of reality used to analyze real-world economic situations market Ans: a group of buyers and sellers of a good or service and the institution or arrangement by which they come together to trade What are the three key economic ideas? Ans: 1.People are rational 2.People respond to economic incentives 3.Optimal decisions are made at the margin Explain the idea people are rational: Ans: -Economist assume consumers and firms use all available information as they act to achieve their goals. -these people wight the benefits and costs and only proceed with actions if the benefits outweigh the costs Explain the idea people respond to economic incentives: Ans: -humans act for a variety of motives -EX; its less costly for a bank to deal with bank robbery than to hire additional security measures Explain the idea optimal decisions are made at the margin: Ans: -margin means extra or additional -it is to continue any activity up to the point where the marginal benefit (MB) equals the marginal cost (MC) thus MB=MC marginal analysis Ans: analysis that involves comparing marginal benefits and marginal costs trade-offs Ans: the idea that because