Economic Analysis Quiz

What is a cost-benefit analysis?

• A method to calculate only the costs involved in a choice

• A method to calculate only the benefits involved in a choice

• A method to calculate both the costs and benefits involved in a choice

• A method to avoid making any choices

What does the "thinking-at-the-margin" principle involve?

• Making decisions based on all or nothing

• Making decisions based on a little more or a little less of something

• Making decisions without considering costs

• Making decisions based on past experiences

What is the "marginal benefit" in economic terms?

• The total benefit of all units combined

• The benefit of the first unit produced

• The benefit you gain by adding one more unit

• The benefit of the last unit produced

What is the best choice according to a cost-benefit analysis?

• The choice with the highest costs

• The choice with the highest benefits

• The choice in which the benefits outweigh the costs

• The choice in which the costs outweigh the benefits

What is the principle that explains why people respond to incentives in predictable ways?

• Principle of Marginal Benefit

• Principle of Opportunity Cost

• Principle of Incentives Matter

• Principle of Supply and Demand

According to the text, why does it make more sense to concentrate on what we do best and trade with others?

• It reduces the need for markets.

• It allows us to end up with more and better choices.

• It eliminates the need for money.

• It increases the time spent on leisure activities.

What is an example of a market as described in Principle 6?

• A weekend flea market

• A private conversation between friends

• A government office

• A public library

What does the markets-coordinate-trade principle state?

• Markets usually do worse than anyone or anything else at coordinating exchanges.

• Markets usually do better than anyone or anything else at coordinating exchanges.

• Markets are controlled by government institutions.

• Markets are inefficient in coordinating exchanges.