Part 1: 12 Key Elements of Economics Review CSE

Incentives Matter

• only when it comes to prices of good and services

• with every choice and decision

• only when people are greedy or selfish

The saying: there's no such thing as a free lunch means that:

• the government is providing the lunch, so it is not free

• every decision you make comes with the cost of the value of the next best alternative

• the production costs of the lunch cannot be ignored

We think on the margin, or in terms of the additional unit of a good or service because:

• people are profit driven and want to make as much money as possible

• people are inherently greedy and want to consume as much as possible

• people do not make "all or nothing" decisions such as either wearing clothes or eating food, but a decision based on how much more of each is needed.

OPINION: Incentives matter more in a market-based/capitalist economy than in a socialist/command-based economy

• Strongly Disagree

• Disagree

• Agree

• Strongly Agree

Incentives Matter. When the price of a good goes up, how does this affect the incentives of buyers and sellers?

• Sellers will produce less of a good

• Sellers will produce more of a good

• Buyers will buy more of a good

A person decides to spend time at a movie with friends, rather than playing video games by himself. The opportunity cost in this scenario is:

• Spending time with friends

• Playing video games

• The cost of the movie

What is another term for the word "marginal" as used in economics?

• Peripheral

• Additional

• Instead

The foundation of trade is:

• governments decide trade policy to provide the best for the electorate and do what is best for the nation as a whole.

• mutual gain based on voluntary exchange resulting in each party involved being better off than they were before trading

• to make the transaction costs as high as possible to ensure every exchange is carefully thought through and does not happen too quickly

When the costs of resources used to search out potential trading partners (transaction costs) are lowered, wealth creation increases. Which of the following is a tool that can decrease transaction cost?

• tariffs

• technology

• licensing requirements

Which of the following best describes how prices act as a signal?

• Prices coordinate the choices of buyers and sellers of products and bring them into balance

• Prices are not able to change quickly enough to act as a sufficient market signal

• Prices indicate how the rich can get richer and the poor get poorer