Define the three key principles of economics
What will be an ideal response?
a) Optimization: Optimization refers to the process of choosing the best option from a set of alternatives, given the available information.
b) Equilibrium: Equilibrium is a special situation where everyone is simultaneously optimizing, so that nobody would benefit personally by changing his or her behavior.
c) Empiricism: Empiricism is analysis that is evidence-based as it uses data to test theories and to determine what is causing things to happen in the world.
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The marginal benefit of an activity is
i. the benefit from a one-unit increase in the activity. ii. the benefit of a small, unimportant activity. iii. measured by what the person is willing to give up to get one additional unit of the activity. A) i only B) ii only C) ii and iii D) i and iii E) iii only
If a lower price for a Pepsi decreases the demand for a Coke, the cross elasticity value for Pepsi and Coke is
A) definitely negative. B) definitely equal to zero. C) definitely positive. D) definitely greater than one. E) possibly negative, positive, or zero, but there is not enough information to decide.