Quiz 1

Question 1

First Principle of Economics

Answer 1

People face trade-offs

Question 2

Second Principle of Economics

Answer 2

Cost of something is what you give up to get it

Question 3

Third Principle of Economics

Answer 3

Rational people think on the margin (marginal benefits vs marginal costs)

Question 4

Fourth Principle of Economics

Answer 4

People respond to incentives

Question 5

Fifth Principle of Economics

Answer 5

Trade can make people better off

Question 6

Sixth Principle of Economics

Answer 6

Markets are usually a good (the best) way to organize economic activity

Question 7

Seventh Principle of Economics

Answer 7

Sometimes government can improve the market outcome

Question 8

Eighth Principle of Economics

Answer 8

The wealth of a nation depends on the productivity of its labor

Question 9

Ninth Principle of Economics

Answer 9

If a government prints too much money, there will be inflation

Question 10

Tenth Principle of Economics

Answer 10

There is a short-run tradeoff between inflation and unemployment

Question 11

Three questions of economic activity

Answer 11

What will we produce?
How will we produce?
For whom will the goods and services be produced?

Question 12

Market Failures

Answer 12

Externalities, monopolies, public goods, common goods.

Question 13

Externalities

Answer 13

a side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops by bees kept for honey.

Question 14

Hypothesis:

Answer 14

a deductive consequence of assumptions and initial conditions. Written as and If then, statement.

Question 15

Inductive logic:

Answer 15

Make Specific observations and then generalize it.

Question 16

Deductive logic:

Answer 16

Start with a general law/principle and apply it to a specific case

Question 17

Empirical:

Answer 17

based on or verifiable by observation

Question 18

Positive economics

Answer 18

Economic science, outcome of the scientific method.

Question 19

Normative economics

Answer 19

Economic policy

Question 20

Scientific method step 1

Answer 20

Choose assumptions and initial conditions

Question 21

Scientific method step 2

Answer 21

Using deductive logic only, derive testable hypothesis about the world.

Question 22

Scientific method step 3

Answer 22

Test the hypothesis using empirical data

Question 23

Scientific method step 4

Answer 23

Either reject hypothesis or fail to reject it.

Question 24

Scientific method step 5

Answer 24

If, after repeated testing, we always fail to reject the hypothesis, then we tentatively accept it as a law

Question 25

Law of demand:

Answer 25

in the market, if the price falls, the quantity demanded increases

Question 26

Impact the Quantity demanded

Answer 26

price

Question 27

Impact the change in Demands

Answer 27

Income, price of substitutes, price of comp goods, tastes, expectations, # of buyers

Question 28

Exchange:

No exchange:

Answer 28

Trade;

Can’t buy anything from anyone else

Question 29

Scarcity

Answer 29

Quantity demand is greater than quantity supply at price 0.

Question 30

CPF

Answer 30

Consumptions Possibilities Frontier

Question 31

Autarky

Answer 31

No trade

Question 32

TOT

Answer 32

Terms of Trade

Question 33

Marginal Rate of Transformation

Answer 33

How many palm leaves you give up for one coconut

Question 34

Adam Smith

Answer 34

Absolute Advantage

Question 35

David Ricardo

Answer 35

Comparative advantage

Question 36

Trade w/o specialization

Answer 36

gain

Question 37

trade with specialization

Answer 37

Gain more

Question 38

Specialize w/o trade

Answer 38

Cannot gain