Eco102 Lt H 1 Review (Chapter 1: Ten Principles Of Economics)

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  • 1/26 Questions

    It is the limited nature of society's resource. 

    • Shortage
    • Rarity
    • Scarcity
    • Poverty
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About This Quiz

Choose the BEST answer. Time alloted is 30 min. There are explanations for some questions.

Economics Quizzes & Trivia

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  • 2. 

    TRADE CAN MAKE EVERYONE BETTER OFF:  Trade allows each person to specialize in the activities he/she does best. 

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Trade allows each person to specialize in the activities they do best, which leads to increased efficiency and productivity. When individuals specialize, they can focus on producing goods and services where they have a comparative advantage, which means they can produce those goods and services at a lower opportunity cost. As a result, trade allows for the allocation of resources to be more efficient and leads to higher overall economic output. This increased productivity benefits everyone involved in the trade, making everyone better off. Therefore, the statement "Trade can make everyone better off" is true.

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  • 3. 

    HOW PEOPLE MAKE DECISIONS: Making decisions requires trading off one goal against another.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Making decisions often involves considering different goals or priorities and weighing them against each other. This means that in order to make a decision, individuals need to prioritize one goal over another or make compromises. Therefore, the statement that making decisions requires trading off one goal against another is true.

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  • 4. 

    What best defines Economics? 

    • Study of how a society attains success

    • Study of how society manages its scarce resources

    • Study of how society efficiently and effectively work

    • Study of the patterns and phenomena concerning the society

    Correct Answer
    A. Study of how society manages its scarce resources
    Explanation
    Economics is the study of how society manages its scarce resources. This definition encompasses the fundamental concept of economics, which is the allocation of limited resources to fulfill unlimited wants and needs. By studying economics, we gain insights into how societies make decisions regarding production, distribution, and consumption of goods and services. Understanding how societies manage their scarce resources is crucial for analyzing and improving economic systems and addressing issues such as poverty, inequality, and sustainability.

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  • 5. 

    RATIONAL PEOPLE THINK AT THE MARGIN: A rational decision maker takes an action if and only if the marginal benefit of the action exceeds the marginal cost.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The statement is true because rational people consider the additional or incremental benefits and costs when making decisions. They weigh the potential benefits of taking an action against the potential costs involved. If the marginal benefit outweighs the marginal cost, a rational person will choose to take the action. This approach helps individuals make efficient decisions by focusing on the incremental impact of their choices rather than just the overall outcome.

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  • 6. 

    THE COST OF SOMETHING IS WHAT YOU GIVE UP TO GET IT: In what circumstance is the opportunity cost the biggest? 

    • A maid leaves Bukidnon and goes to Manila to work

    • College athletes who can earn millions drop out of school to play professional sports

    • Dino modelling as a part time job

    • A sari-sari store renovates its look

    Correct Answer
    A. College athletes who can earn millions drop out of school to play professional sports
    Explanation
    The opportunity cost refers to the value of the next best alternative that is forgone when making a decision. In this case, the college athletes who drop out of school to play professional sports have the biggest opportunity cost. By choosing to pursue professional sports instead of completing their education, they are giving up the potential benefits and opportunities that come with having a college degree. This includes higher earning potential, job security, and a broader range of career options. The potential millions they can earn in professional sports may seem lucrative, but the long-term consequences of not having a college degree can outweigh the immediate gains.

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  • 7. 

    PEOPLE RESPOND TO INCENTIVES: When analyzing any policy, we must consider not only the direct effects but also the less obvious indirect effects that work through incentives.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Incentives play a crucial role in influencing people's behavior and decision-making. When analyzing any policy, it is important to consider the direct effects of the policy, as well as the indirect effects that may arise through the incentives it creates. People are more likely to respond positively to policies that provide them with incentives or rewards, while they may be less motivated to engage in certain behaviors if there are no incentives or if the incentives are negative. Therefore, understanding the role of incentives is essential in policy analysis.

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  • 8. 

    SOCIETY FACES A SHORT-RUN TRADE OFF BETWEEN INFLATION AND UNEMPLOYMENT  Policymakers can influence the overall demand for goods and services which in trun influence the combination of inflation and unemployment.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Policymakers have the ability to influence the overall demand for goods and services in the economy. By implementing certain policies, they can either stimulate or dampen aggregate demand. When policymakers aim to stimulate demand, it can lead to higher levels of inflation but lower levels of unemployment. Conversely, when policymakers aim to reduce inflation, it can result in higher levels of unemployment. Therefore, there is a short-run trade-off between inflation and unemployment that policymakers must consider when making decisions about economic policies.

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  • 9. 

    RATIONAL PEOPLE THINK AT THE MARGIN: Rational people don't need to compare marginal benefits and marginal costs; rather, they make decisions fast. 

    • True

    • False

    Correct Answer
    A. False
    Explanation
    This statement is false because rational people do consider marginal benefits and marginal costs when making decisions. Rational individuals weigh the additional benefits they would receive from taking a certain action against the additional costs they would incur. By comparing the marginal benefits and costs, they can make informed decisions that maximize their overall well-being.

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  • 10. 

    HOW PEOPLE MAKE DECISIONS: When the government tries to cut the economic pie into more equal slices, the pie gets bigger. 

    • True

    • False

    Correct Answer
    A. False
    Explanation
    When the government tries to cut the economic pie into more equal slices, it does not necessarily result in the pie getting bigger. In fact, redistributive policies can sometimes have the opposite effect and lead to a smaller overall pie. This is because when the government imposes higher taxes on wealthier individuals or businesses to fund social programs, it can discourage investment and economic growth. Therefore, the statement is false.

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  • 11. 

    HOW PEOPLE MAKE DECISIONS: When the government tries to achieve greater equality, their policies reduce efficiency. 

    • True

    • False

    Correct Answer
    A. True
    Explanation
    When the government implements policies to achieve greater equality, it often involves redistributing resources and wealth from those who have more to those who have less. This can result in a decrease in efficiency because it may discourage individuals from working hard or investing in their businesses if they know that their earnings will be heavily taxed or redistributed. Therefore, it is true that when the government tries to achieve greater equality, their policies can reduce efficiency.

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  • 12. 

    HOW THE ECONOMY AS A WHOLE WORKS The growth rate of a nation's productivity doesn't determine the growth rate of its average income. 

    • True

    • False

    Correct Answer
    A. False
    Explanation
    the growth rate of a nation's productivity determines the growth rate of its average income.

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  • 13. 

    HOW PEOPLE MAKE DECISIONS: Efficiency refers to how the pie is divided into individual slices, and equality refers to the size of the economic pie.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The statement is false because efficiency refers to how resources are allocated or used to maximize productivity and minimize waste, while equality refers to the fair distribution of resources and opportunities among individuals. The statement incorrectly suggests that efficiency and equality are related to the division and size of the economic pie, which is not accurate.

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  • 14. 

    A COUNTRY'S STANDARD OF LIVING DEPEND ON ITS ABILITY TO PRODUCE GOODS AND SERVICES Variations in living standards is not attributable to differences in countries' productivity

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Almost all variations in living standards is attributable to differences in countries' productivity.

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  • 15. 

    What is the Greek word where the word "economy" comes from? This word means "one who manages a household."

    • Okionomos

    • Okinoimos

    • Oikonomos

    • Oikonoimos

    Correct Answer
    A. Oikonomos
    Explanation
    The correct answer is Oikonomos. The word "economy" comes from the Greek word "Oikonomia" which means "one who manages a household."

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  • 16. 

    Each individual in a society can attain the highest standard of living to which he/she might aspire.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The statement suggests that every individual in a society can achieve their highest standard of living, which is not true. Various factors such as economic disparities, social inequalities, and limited resources can prevent individuals from attaining their desired standard of living. Additionally, personal circumstances, opportunities, and choices also play a significant role in determining one's standard of living. Therefore, it is not realistic to assume that everyone can reach their highest aspirations in terms of living standards.

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  • 17. 

    In most societies, resources are allocated through:

    • All-powerful dictator

    • Combined actions of millions of households and firms

    • Government and the departments under it

    • Self-interest of each owner of the households and firms

    Correct Answer
    A. Combined actions of millions of households and firms
    Explanation
    Resources are allocated through the combined actions of millions of households and firms in most societies. This means that individuals and businesses make decisions based on their own self-interest, leading to the distribution and allocation of resources. This decentralized approach allows for a market economy where supply and demand determine resource allocation. It is a more democratic and inclusive method compared to an all-powerful dictator or government-controlled allocation.

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  • 18. 

    An economy is just a group of people dealing with one another as they go about their lives.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The statement is true because an economy is indeed a system where individuals interact with each other through various economic activities. It includes the production, distribution, and consumption of goods and services. These interactions can take place in different forms, such as buying and selling, trading, or providing services. Ultimately, an economy is a reflection of the collective actions and behaviors of the people within it.

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  • 19. 

    GOVERNMENT CAN SOMETIMES IMPROVE MARKET OUTCOMES The invisible hand is powerful and omnipotent. 

    • True

    • False

    Correct Answer
    A. False
    Explanation
    It is not omnipotent.

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  • 20. 

    GOVERNMENT CAN SOMETIMES IMPROVE MARKET OUTCOMES The invisible hand cannot work its magic if the government enforces the rules and maintains the institutions that are key to a market economy. 

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The invisible hand can only work if the government enforces the rules and maintains the institutions that are key to a market economy.

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  • 21. 

    MARKETS ARE USUALLY A GOOD WAY TO ORGANIZE ECONOMIC ACTIVITY are the instruments with which the invisible hand directs economic activity:

    • People

    • Government and its departments

    • Household and firms

    • Prices

    Correct Answer
    A. Prices
    Explanation
    Prices serve as the instruments with which the invisible hand directs economic activity. In a market economy, prices play a crucial role in coordinating the actions of individuals, households, and firms. They provide signals and incentives for producers to allocate resources efficiently and for consumers to make decisions based on their preferences and budget constraints. Prices also facilitate the exchange of goods and services by serving as a common unit of measurement and a medium of exchange. Overall, the functioning of markets and the role of prices are essential in organizing economic activity.

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  • 22. 

    MARKETS ARE USUALLY A GOOD WAY TO ORGANIZE ECONOMIC ACTIVITY: The theory behind CENTRAL PLANNING is that the government as well as the households and firms organize economic activity in a way that promote economic well-being for the country as a whole. 

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The given statement is false. The theory behind central planning is that the government, rather than markets, organizes economic activity. In a centrally planned economy, the government makes decisions regarding production, distribution, and resource allocation. This approach is based on the belief that government intervention can lead to more equitable outcomes and address market failures. However, history has shown that centrally planned economies often struggle with inefficiency, lack of innovation, and limited individual freedom. In contrast, markets allow for decentralized decision-making, competition, and price signals to efficiently allocate resources and promote economic well-being.

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  • 23. 

    MARKETS ARE USUALLY A GOOD WAY TO ORGANIZE ECONOMIC ACTIVITY Market prices reflect both the value of a good to a society and its value to the makers of the good. 

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Market prices reflect both the value of a good to a society and its cost to society of making the good.

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  • 24. 

    10 Principles of Economics: What are the 4 principles concerned with How People Make Decisions? 

  • 25. 

    10 Principles of Economicst: What are the 3 principles concered with How People Interact?

  • 26. 

    10 Principles of Economics:  What are the 3 principles concerened with How the Economy as a Whole Works?

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  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Dec 25, 2011
    Quiz Created by
    Dan_tinagan
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