ch1ak - Econ 2 Principles of Economics Chapter 1 Questions...

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1 Econ 2: Principles of Economics Chapter 1 Questions for Review 1. Examples of trade-offs include time trade-offs (such as studying one subject over another or studying at all compared to engaging in social activities) and spending trade- offs (such as whether to use your last 15 dollars to purchase a pizza or to buy a study guide for that tough economics course). 3. The marginal benefit of a glass of water depends on your circumstances. If you have just run a marathon or you have been walking in the desert sun for three hours, the marginal benefit is very high. But if you have been drinking a lot of liquids recently, the marginal benefit is quite low. The point is that even the necessities of life, like water, do not always have large marginal benefits. 4. Policymakers need to think about incentives so they can understand how people will respond to the policies they put in place. The text's example of seat belt laws shows that policy actions can have unintended consequences. If incentives matter a lot, they
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