Economics Vocab Practice Quiz 1

What is the principle that states that people make decisions by comparing costs and benefits?

• Scarcity-forces-tradeoffs principle

• Costs-versus-benefits principle

• Incentives-matter principle

• Markets-coordinate-trade principle

Answer explanation

The principle that states people make decisions by comparing costs and benefits is the Costs-versus-benefits principle.

What is the economic term for a situation where there are limited resources to fulfill unlimited wants?

• Scarcity-forces-tradeoffs principle

• Microeconomics

• Macroeconomics

• Incentive

Answer explanation

Scarcity-forces-tradeoffs principle is the economic term for a situation where there are limited resources to fulfill unlimited wants.

Which economic model assumes that individuals make decisions based on rational behavior?

• Scientific method

• Economic enigma

• Rational-behavior model

• Invisible hand

Answer explanation

The rational-behavior model assumes individuals make decisions based on rational behavior, making it the correct choice.

What is the term for the additional benefit gained from consuming one more unit of a good or service?

• Marginal benefit

• Incentive

• Marginal cost

• Economic model

Answer explanation

Marginal benefit refers to the additional benefit gained from consuming one more unit of a good or service. It is the correct choice because it captures the concept of additional benefit.

According to which principle do incentives play a crucial role in influencing people's behavior?

• Incentives-matter principle

• Thinking-at-the-margin principle

• Markets-coordinate-trade principle

• Costs-versus-benefits principle

Answer explanation

The incentives-matter principle states that incentives play a crucial role in influencing people's behavior.

Which branch of economics focuses on the behavior of the entire economy?

• Microeconomics

• Marginal benefit

• Invisible hand

• Macroeconomics

Answer explanation

Macroeconomics focuses on the behavior of the entire economy, making it the correct choice.

What is the term for the additional cost incurred from consuming one more unit of a good or service?

• Economic model

• Marginal benefit

• Incentive

• Marginal cost

Answer explanation

The term for the additional cost incurred from consuming one more unit of a good or service is called the marginal cost. It represents the cost of producing one additional unit and helps determine optimal production levels.

According to which principle do markets efficiently allocate resources through trade?

• Costs-versus-benefits principle

• Incentives-matter principle

• Scarcity-forces-tradeoffs principle

• Markets-coordinate-trade principle

Answer explanation

Markets efficiently allocate resources through trade by coordinating trade among buyers and sellers.

Which principle states that scarcity of resources forces individuals to make tradeoffs?

• Scarcity-forces-tradeoffs principle

• Rational-behavior model

• Scientific method

• Invisible hand

Answer explanation

The scarcity-forces-tradeoffs principle states that limited resources require individuals to make choices and tradeoffs.

What is the term for the study of individual economic units such as households and businesses?

• Incentive

• Economic enigma

• Microeconomics

• Macroeconomics

Answer explanation

Microeconomics is the study of individual economic units like households and businesses. It focuses on analyzing their behavior and decision-making processes.