Question

Economics is defined as 

a. the study of business 

b. the study of how society controls prices and output 

c. the study of how society manages its scarce resources 

d. the study of government regulation 

Paul decides to spend an hour playing football rather than studying or working at $6 per hour. His trade-off is 

a. nothing, because he enjoys playing football more than working or studying 

b. the benefit to his marks from studying for an hour or the $6 he could have earned 

c. the increase in skill he obtains from playing football for that hour 

d. nothing, because he spent $6 for admission into the sports complex to play football

Answer 1

Economics is the study of the interaction between economic agents taking various decisions about allocating scarce resources to increase economic wellbeing and profit.

Among the options:

• Economics not only study business. The business consists of a small part of economics.
• Society does not solely control prices and output, markets do and sometimes government intervein when market fails.
• Economics is the study of managing scarce resources.
• The government regulations are the way to achieve some economic goal of maximizing social welfare.

Therefore, the correct option is: (c)

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The opportunity cost is the cost of foregoing next best alternative of an economic or social decision. This is also the trade off between two alternative. In this case the trade-off is the benefit of foregoing one hour study or the wage of $6.

Given the option:

• There is always a trade-off for every decision an agent makes.
• The tradeoff is the benefit of study or the $6 wage
• The increased skill is not a trade-off, he aquire it by choosing football. The trade-off is the option or benefit he lets go.
• There is always a trade-off for every decision an agent makes.

Therefore, the correct option is: (b)