E4P - L1 - Lesson 1

What does the toolkit in economics help with?

• Understanding decisions

• Building houses

• Cooking meals

• Planting trees

Answer explanation

The toolkit in economics is designed to help understand decisions made by individuals and organizations regarding resource allocation, trade-offs, and incentives, making 'Understanding decisions' the correct choice.

What do the four core principles provide?

• A framework for analyzing decisions

• A recipe for baking cakes

• A guide to playing sports

• A map for traveling

Answer explanation

The four core principles provide a framework for analyzing decisions, helping individuals and organizations evaluate options and make informed choices. The other options do not relate to decision-making.

What is the cost-benefit principle about?

• Making friends

• Costs and benefits as incentives

• Playing games

• Eating food

Answer explanation

The cost-benefit principle focuses on evaluating the costs and benefits of decisions, where costs and benefits serve as incentives for making choices. Thus, the correct answer is 'Costs and benefits as incentives'.

When should you pursue a choice according to the cost-benefit principle?

• When benefits are less than costs

• When benefits are at least as great as costs

• When costs are unknown

• When you feel like it

Answer explanation

According to the cost-benefit principle, you should pursue a choice when the benefits are at least as great as the costs. This ensures that the decision is economically rational and justifiable.

What is the solution to the dilemma?

• Ignore the costs

• Convert costs and benefits into dollars

• Ask a friend

• Choose randomly

Answer explanation

Converting costs and benefits into dollars allows for a clear comparison, making it easier to evaluate the dilemma objectively. This method provides a tangible basis for decision-making, unlike the other options.

What should you evaluate according to the solution?

• Your willingness to pay

• Your favorite color

• Your best friend

• Your favorite food

Answer explanation

You should evaluate your willingness to pay as it directly impacts your purchasing decisions and budget. The other options, like favorite color or food, are not relevant to financial evaluations.

What does "willingness to pay" mean?

• The amount you want to pay for something

• The amount you are willing to pay to get a benefit

• The amount you have to pay for something

• The amount you refuse to pay for something

Answer explanation

'Willingness to pay' refers to the maximum amount a person is ready to spend to obtain a benefit, making the correct choice the second option. It reflects the value they place on the benefit rather than just the price.

What principle is used to decide to buy the granola bar?

• Cost-benefit principle

• Cost-saving principle

• Benefit-loss principle

• Price-value principle

Answer explanation

The cost-benefit principle evaluates whether the benefits of buying the granola bar outweigh the costs. This principle guides the decision-making process, making it the correct choice.

What does cost-benefit analysis allow for?

• Selfish decisions

• Unselfish decisions

• Quick decisions

• Expensive decisions

Answer explanation

Cost-benefit analysis helps in making unselfish decisions by evaluating the overall benefits to society rather than just individual gains, ensuring that choices consider the welfare of others.

What should be counted among the benefits in the scenario?

• Friend's happiness

• Friend's money

• Friend's time

• Friend's effort

Answer explanation

Among the benefits, a friend's happiness is paramount as it reflects emotional well-being and satisfaction. While money, time, and effort are important, they do not directly equate to the positive emotional impact that happiness brings.