Principles of Economics Quiz

Which principle of economics explains why people make trade-offs?

• Principle of Marginal Thinking

• Principle of Opportunity Cost

• Principle of Trade

• Principle of Market Power

"Government can sometimes improve market outcomes" refers to which principle?

• People Face Trade-offs

• Rational People Think at the Margin

• Markets Are Usually a Good Way to Organize Economic Activity

• Governments Can Sometimes Improve Market Outcomes

What does the principle of "incentives" suggest about behavior?

• People always act irrationally

• People respond to rewards and punishments

• People face no opportunity cost

• Resources are unlimited

Which principle explains that trade can make everyone better off?

• Trade-offs

• Market Efficiency

• Trade as a Source of Gains

• Government Intervention

Which principle emphasizes the importance of opportunity cost?

• Thinking at the Margin

• Scarcity

• Rationality

• Incentives

According to economics, a rational decision-maker takes an action if:

• The marginal benefit is greater than the marginal cost

• There are no trade-offs involved

• It involves only monetary gain

• The opportunity cost is zero

"Prices rise when the government prints too much money" relates to:

• Inflation

• Deflation

• Market Economy

• Comparative Advantage

Which principle explains why resources are scarce?

• People Face Trade-offs

• Resources Are Unlimited

• Scarcity Forces Choices

• Prices Do Not Matter

What role does marginal analysis play in decision-making?

• Evaluates the total cost of decisions

• Compares marginal cost to marginal benefit

• Eliminates trade-offs

• Reduces scarcity

Which principle explains the relationship between inflation and unemployment?

• The Phillips Curve

• Law of Demand

• Invisible Hand

• Comparative Advantage