ECON 201 Exam questions with
answers 100%
Economics - ANS✅✅The study of how individuals and societies allocate their limited resources to
satisfy their practically unlimited wants
- Economics is a social science that studies how people behave
Scarcity: - ANS✅✅The limited nature of society's resources, given society's unlimited wants &
needs
-Economics seeks to answer how individuals & societies make decisions about scarce resources
The Economy - ANS✅✅The institutional structure through which individuals in a society
coordinate their diverse wants
Economic agents in the economy - ANS✅✅• Households
• Firms
• Government
Economists use these 5 principles to think of every issue (5 foundations): - ANS✅✅1. Incentives
2. Trade-offs
3. Opportunity cost
4. Marginal thinking
5. Trade creates value
Incentives: - ANS✅✅Factors that motivate you to act or exert effort
•are used to affect how people respond
•Example: Getting paid to do a job
, _______________ incentive - ANS✅✅Encourage action by offering rewards or payments
•Example: Bonus points on exams for participating in class
- positive
_______________ negative - ANS✅✅Discourage action by providing undesirable consequences or
punishments
•Example: Getting a zero on Smartwork if you don't complete it before the due date
- negative
Unintended consequences: - ANS✅✅An unplanned result of an incentive
•Usually negative & unwanted
•Policymakers have to figure out how to balance the benefits brought on by policy with potential
unintended consequences
•Example: Higher unemployment caused by a government plan to provide higher unemployment
compensation
opportunity cost - ANS✅✅The highest-valued alternative that must be sacrificed to get something
else
-The best possible decision is the one that minimizes the opportunity cost
Economic thinking: - ANS✅✅A purposeful evaluation of the available opportunities to make the
best decision possible
Marginal thinking: - ANS✅✅Evaluating whether the benefit of one more unit of something is
greater than its cost
answers 100%
Economics - ANS✅✅The study of how individuals and societies allocate their limited resources to
satisfy their practically unlimited wants
- Economics is a social science that studies how people behave
Scarcity: - ANS✅✅The limited nature of society's resources, given society's unlimited wants &
needs
-Economics seeks to answer how individuals & societies make decisions about scarce resources
The Economy - ANS✅✅The institutional structure through which individuals in a society
coordinate their diverse wants
Economic agents in the economy - ANS✅✅• Households
• Firms
• Government
Economists use these 5 principles to think of every issue (5 foundations): - ANS✅✅1. Incentives
2. Trade-offs
3. Opportunity cost
4. Marginal thinking
5. Trade creates value
Incentives: - ANS✅✅Factors that motivate you to act or exert effort
•are used to affect how people respond
•Example: Getting paid to do a job
, _______________ incentive - ANS✅✅Encourage action by offering rewards or payments
•Example: Bonus points on exams for participating in class
- positive
_______________ negative - ANS✅✅Discourage action by providing undesirable consequences or
punishments
•Example: Getting a zero on Smartwork if you don't complete it before the due date
- negative
Unintended consequences: - ANS✅✅An unplanned result of an incentive
•Usually negative & unwanted
•Policymakers have to figure out how to balance the benefits brought on by policy with potential
unintended consequences
•Example: Higher unemployment caused by a government plan to provide higher unemployment
compensation
opportunity cost - ANS✅✅The highest-valued alternative that must be sacrificed to get something
else
-The best possible decision is the one that minimizes the opportunity cost
Economic thinking: - ANS✅✅A purposeful evaluation of the available opportunities to make the
best decision possible
Marginal thinking: - ANS✅✅Evaluating whether the benefit of one more unit of something is
greater than its cost
