Econ Alive Chapter 1 Review

What does Adam Smith argue in "The Wealth of Nations"?

• • Government interference helps the economy.

• • Competition is crucial for a healthy economy.

• • A free market economy is not an ideal system.

• • Competition is very damaging to the economy.

Economics is often defined as the study of how people choose to

• • analyze the benefits and consequences of their decisions.

• • sell goods and services that are produced domestically.

• • measure efficiency with the production of luxury goods.

• • use their limited resources to satisfy their unlimited wants.

A riddle or puzzle that can be explained through an economic analysis is called

• • an economic enigma.

• • a cost-benefit analysis.

• • a factor of production.

• • a perfect competition.

What does macroeconomics examine?

• • an individual's economic decision making

• • the workings of an economy as a whole

• • the benefits and drawbacks of businesses

• • the economic functions of a household

When an economist uses objective analysis to find out how the economy actually works, this is

• • normative economics.

• • tradeoff economics.

• • scarcity economics.

• • positive economics.

Which of the following is true of the scarcity-forces-tradeoffs principle?

• • Resources necessary to fulfill our desires are scarce.

• • Limited resources force us to make different choices.

• • We must make choices about what we want the most.

• • all of the above

You consider the costs and benefits between seeing your friends and doing homework. This is an example of

• • the no-free-lunch theory.

• • a scarcity-tradeoff idea.

• • a cost-benefit analysis.

• • the invisible hand principle.

What is a marginal benefit?

• • two choices with equivalent benefits

• • what you gain by adding one more unit

• • the benefit of one thing over another

• • the benefit of a cost when you make a choice

Which of the following is an example of a positive incentive?

• • honor societies

• • parking tickets

• • high gas prices

• • prison time

You pay a hairdresser $40 to get a nice haircut. This demonstrates the

• • cash-in-exchange-for-benefit principle.

• • we-do-what-we-are-good-at principle.

• • trade-makes-people-better-off principle.

• • we-recognize-our-limitations principle.