test 2 essays - Essay Answers for Exam 2 1. Q.) List,...

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Essay Answers for Exam 2 1 . Q.) List, Define, Explain 4 of the 10 key elements of economics A.) 1. There is no such thing as a free lunch : Humans have an unlimited desire for limited resources. We want to have everything, but because there is no free lunch, we must give something up in order to get something else. This sacrifice is the price that we pay for a good or service. Even if a good is provided to an individual for free, the cost is simply shifted and not reduced. It is free for that individual, but the cost is shifted to whoever has to produce it. Terms like free education or free medical care are deceptive because these things still require scarce resources that could instead be used to produce something else. A.) 2. People earn income by helping others : People who earn large incomes do so because they provide people with lots of things that they value. The fact that helping someone else is the source of your income gives you a strong incentive to acquire skills and develop talents so you can provide others with valuable goods and services. A.) 3. Trade promotes economic progress : People agree to trade because they expect it to improve their well-being. “If you do something good for me, I will do something good for you.” Progress is attained because trade moves goods from people who value them less to people who value them more, it allows each of us to specialize in the things that we do best, and trade makes it possible for firms to achieve lower per-unit costs by adapting mass production methods. A.) 4. Decisions are made at the margin: Nearly all choices are made at the margin. This means they involve adding to or taking away from what we currently have, instead of an all-or-nothing decision. The marginal cost of something is the value of other things we give up, while the
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test 2 essays - Essay Answers for Exam 2 1. Q.) List,...

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