ECON 110 Chap 1

Question 1

How people interact

Answer 1

5. Trade can make everyone better off
6. Markets are usually a good way to organize economic activity
7. Govts can sometimes improve market outcomes

Question 2

How the Economy as a Whole Works

Answer 2

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.
10. Society faces a short run trade-off between inflation and unemployment.

Question 3

Definition of Economics

Answer 3

The academic discipline that deals with the allocation of scarce resources to meet human needs and objectives.

Question 4

How people make decisions

Answer 4

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