Chapter 1

Question 1

Scarcity.

Answer 1

Limited time, money, and energy.

Question 2

Single most important concept in economic and smart choices in life.

Answer 2

Opportunity cost.

Question 3

Trade-off.

Answer 3

Give up something to get something else.

Question 4

For a smart choice.

Answer 4

Value of what you get must be > the value of what you give up.

Question 5

Cost best alternative given up (cost of any choice).

Answer 5

Opportunity cost.

Question 6

Incentives.

Answer 6

Rewards and penalties for choices.

Question 7

You are more likely to choose actions with rewards (1), and avoid actions with penalties (2).

Answer 7

1. Positive incentives.
2. Negative incentives.

Question 8

Key to understanding why specializing and trading makes us all better off.

Answer 8

Opportunity cost and comparative advantage.

Question 9

Each person feels what they get is of greater value than what they give up.

Answer 9

Voluntary trade.

Question 10

Ability to produce a product or service at a lower absolute cost than another producer.

Answer 10

Absolute advantage.

Question 11

Ability to produce a product/service at a lower opportunity cost than another produces.

Answer 11

Comparative advantage.