Check for Understanding: Fundamental Economic Principles

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Question 1 of 6

1. Question
Which of the following best represents the concept of comparative advantage?
- A country increases its export tariffs to protect domestic industries from foreign competition.
- An individual invests in stocks to diversify their investment portfolio.
- Two countries engage in trade based on their respective strengths and specialization.
- A firm increases its advertising budget to gain a larger market share.
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Question 2 of 6

2. Question
Which of the following scenarios best illustrates the principle of opportunity cost?
- A consumer purchases a luxury item without considering its price.
- A business invests in new machinery to improve production efficiency.
- A government increases taxes to fund public infrastructure projects.
- An individual chooses to spend their free time studying rather than watching TV.
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Question 3 of 6

3. Question
Which of the following scenarios best exemplifies the principle of trade-offs?
- A consumer purchases a product at a discounted price.
- A producer increases the supply of a popular item due to high demand.
- An individual chooses to work overtime to earn extra income.
- A government introduces subsidies to support a struggling industry.
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Question 4 of 6

4. Question
Which principle best explains the behavior of consumers buying more of a product when its price decreases?
- Principle 1: People face trade-offs.
- Principle 2: The cost of something is what you give up to get it.
- Principle 3: Rational people think at the margin.
- Principle 4: People respond to incentives.
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Question 5 of 6

5. Question
Which principle highlights that individuals or countries must consider the opportunity cost of not producing other goods or services when specializing in certain areas?
- Principle 1: People face trade-offs.
- Principle 2: The cost of something is what you give up to get it.
- Principle 3: Rational people think at the margin.
- Principle 4: People respond to incentives.
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Question 6 of 6

6. Question
Which principle suggests that incentives can influence the comparative advantage and trade patterns of individuals and countries?
- Principle 1: People face trade-offs.
- Principle 2: The cost of something is what you give up to get it.
- Principle 3: Rational people think at the margin.
- Principle 4: People respond to incentives.
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Check for Understanding: Fundamental Economic Principles

Check for Understanding: Fundamental Economic Principles

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