Principles of Economic Thinking Quiz

According to the scarcity-forces-tradeoffs principle, why do people have to make choices?

• Because resources are unlimited

• Because resources are scarce

• Because money is limited

• Because trade is necessary

What is another name for the scarcity-forces-tradeoffs principle?

• The no-free-lunch principle

• The cost-versus-benefits principle

• The thinking-at-the-margin principle

• The incentives-matter principle

What does the costs-versus-benefits principle tell us about decision making?

• People choose something when the costs are greater than the benefits

• People choose something when the benefits are greater than the costs

• People choose something when the costs and benefits are equal

• People choose something randomly without considering costs or benefits

What does it mean to think at the margin?

• To make decisions based on immediate costs and benefits

• To make decisions based on long-term consequences

• To make decisions based on a little more or a little less of something

• To make decisions without considering costs or benefits

According to the trade-makes-people-better-off principle, people trade with others to have more choices and better outcomes.

• True

• False

What does the markets-coordinate-trade principle claim about markets?

• Markets are inefficient and need government interference

• Markets are only found in physical locations like supermarkets

• Markets are the best way to coordinate exchanges between buyers and sellers

• Markets are controlled by a central authority

Why is it important to consider future consequences when making decisions?

• Future consequences are always positive

• Future consequences are always negative

• Future consequences can have long-term effects

• Future consequences have no impact on decision making

What separates a good economist from a bad economist according to Henry Hazlitt?

• A good economist looks at the immediate consequences of a proposed course

• A good economist looks at the longer and indirect consequences of a proposed course

• A good economist only considers the direct consequences of a proposed course

• A good economist only considers the short-term effects of a proposed course

What is the law of unintended consequences?

• Actions always have effects that are not expected

• Actions never have any unintended effects

• Actions only have positive unintended effects

• Actions only have negative unintended effects

What is an example of the law of unintended consequences?

• Global climate change due to the combustion of fossil fuels

• The efficiency of markets in coordinating trade

• The scarcity of resources forcing tradeoffs

• The costs-versus-benefits principle in decision making