ECON UNIT 1 - REVIEW 1

The definition of economics is the study of

• how governments set social policy.

• the influence of the Federal Reserve on history.

• how governments dictate which businesses succeed or fail in a country.

• the use of scarce resources that have alternative uses.

You have $20. With that $20, you can either put gas in your car, take a date to the movies, or buy new clothes. You cannot, however, do all three choices. Regardless of which alternative you choose,

• you will never have enough money to afford all of your alternatives.

• you will be unhappy because you wanted to do all the alternatives.

• you are making a tradeoff by not choosing one of the other alternatives.

• the economics of the situation do not change.

You have $20. With that $20, you can either put gas in your car, take a date to the movies, or buy new clothes. You cannot, however, do all three choices. Your first choice for the use of the $20 is to put gas in your car. Your second choice is to take a date to the movies. Your third choice is to buy new clothes. The opportunity cost for using the $20 to put gas in your car is

• $20.

• taking a date to the movies.

• buying new clothes.

• both taking a date to the movies and buying new clothes.

When evaluating the tradeoffs of making a choice, you

• evaluate the costs versus the benefits of each possible choice.

• count the number of opportunity costs of making the choice.

• count the number of benefits you get from your choice.

• quantify each tradeoff in terms of dollars and cents.

After doing a cost-benefit analysis, you generally choose the option in which

• the benefits outweigh the costs.

• the costs outweigh the benefits.

• the costs and benefits are equal.

• the dollar value is the best for your budget.

Positive Economics are how things ought to be.

• True

• False

How many Principals guide economics?

• 6

• 2

• 7

• 4