ECO 201 EXAM 1
1. What is Economics?: The study of the choices that individuals make given the presence of
scarcity; the study of how human beings coordinate their wants or how society manages its
scarce resources
2. What are the 10 principles of economics: 1. People face trade-offs
2. The cost of something is what you give up to get it; opportunity cost, be able to understand
what opportunity cost are
3. Rational people think at the margin
4. People respond to incentives - positive or negative
5. Trade can make everyone better off - not a zero-sum game, mainly those trading with each
other
6. Markets are usually a good way to organize economic activity
7. Governments can sometimes improve market outcomes
8.A country's standard of living depends on its ability to produce goods and services
3. What is scarcity?: Is limited resources but unlimited wants, not a bad thing because it
creates value, there is never enough to meet our needs and desires
4. What is scarcity and poverty?: Poverty is need based such as house, shelter, food and scarcity
is a want based problem but limited resources
5. What are the types of resources: FOP: 1. Land 2. Nonhuman animal resources
3. Labor
4. Capital 5. technology 6. Entrepreneurial Ability
6. We combine FOP 1-6 to produce...?: Commodities - economic goods and services
7. Three most important questions in Economics: What to produce, how to produce, and for
who to produce
8. Opportunity cost: the most valuable alternative that is given up if a particular investment is
undertaken
9. Trade off: All the choices given up
10.An example of making a decision at the margin: Cheating on a test, you dont go into the test
thinking youre going to cheat
11.What is the economic decision rule?: marginal benefit = marginal cost, your decision is
based off if the benefit is more than the cost
12.What are some positive incentive examples?: Coupons, discounts, rewards, freebies
13.What does negative incentives do and why are they negative?: Punishes people for behaving or
acting in a certain way, they are things you dont want to get
14.Negative incentive examples: Speeding, smoking, leaving babies in the car, parking ticket,
1/
8
, ECO 201 EXAM 1
fine
15.What does it mean when it says trade isnt a zero sum game?: It means both people will be
better off after trading
2/
8
1. What is Economics?: The study of the choices that individuals make given the presence of
scarcity; the study of how human beings coordinate their wants or how society manages its
scarce resources
2. What are the 10 principles of economics: 1. People face trade-offs
2. The cost of something is what you give up to get it; opportunity cost, be able to understand
what opportunity cost are
3. Rational people think at the margin
4. People respond to incentives - positive or negative
5. Trade can make everyone better off - not a zero-sum game, mainly those trading with each
other
6. Markets are usually a good way to organize economic activity
7. Governments can sometimes improve market outcomes
8.A country's standard of living depends on its ability to produce goods and services
3. What is scarcity?: Is limited resources but unlimited wants, not a bad thing because it
creates value, there is never enough to meet our needs and desires
4. What is scarcity and poverty?: Poverty is need based such as house, shelter, food and scarcity
is a want based problem but limited resources
5. What are the types of resources: FOP: 1. Land 2. Nonhuman animal resources
3. Labor
4. Capital 5. technology 6. Entrepreneurial Ability
6. We combine FOP 1-6 to produce...?: Commodities - economic goods and services
7. Three most important questions in Economics: What to produce, how to produce, and for
who to produce
8. Opportunity cost: the most valuable alternative that is given up if a particular investment is
undertaken
9. Trade off: All the choices given up
10.An example of making a decision at the margin: Cheating on a test, you dont go into the test
thinking youre going to cheat
11.What is the economic decision rule?: marginal benefit = marginal cost, your decision is
based off if the benefit is more than the cost
12.What are some positive incentive examples?: Coupons, discounts, rewards, freebies
13.What does negative incentives do and why are they negative?: Punishes people for behaving or
acting in a certain way, they are things you dont want to get
14.Negative incentive examples: Speeding, smoking, leaving babies in the car, parking ticket,
1/
8
, ECO 201 EXAM 1
fine
15.What does it mean when it says trade isnt a zero sum game?: It means both people will be
better off after trading
2/
8
