1. What is the primary objective of Economics? (What is the core of Economics?) Explain
Economics aims to understand how societies allocate limited resources to satisfy unlimited wants
and needs. It studies how individuals, businesses, and governments make choices about
production, prices, and quantities in markets, and how these decisions impact overall well-being
and resource allocation
2. What are the basic questions economists must answer when they are evaluating an
economic policy (public policy)?
What are the goals of the policy?
What are the potential effects?
What are the trade-offs and costs?
What does it mean to think like an economist? How do economists think differently than
Thinking like an economist involves analyzing choices and behaviors based on the principles of
scarcity, cost-benefit analysis, and rational decision-making. Economists consider the unintended
consequences of actions, emphasize the importance of incentives, and often rely on quantitative
methods to understand complex systems. This mindset encourages a systematic approach to
understanding human behavior and the allocation of resources, setting it apart from more
intuitive or immediate perspectives.
4. Is it common for marginal costs to increase and marginal benefits to decrease? Think
about a simple activity you can practice (for instance, eating 1,2, 3...20 chocolates; or
drinking 1,2,3, and 4 water bottles when you are thirsty; or repeat 1,2,3,4 times the same
sport practice in a day after school). What is the marginal benefit from the first, second,
and third practices for the activity in a day? What is the marginal cost from the first,
second, and third practices for the activity in a day? Hint: It is important to remember that
cost and benefits are not strictly financial.
In many cases, it is typical for the marginal costs to rise and the marginal benefits to decline as
additional units of an activity are undertaken. For instance, taking the example of practicing a
sport after school, the initial practice may yield high marginal benefits as it brings excitement
and enhances skills. However, the marginal benefit of the second practice may diminish due to
fatigue, and by the third practice, it might decrease even further due to diminishing returns in
skill improvement. Conversely, the marginal cost of the first practice may be relatively low in
terms of physical strain, but it could increase with the second practice due to fatigue, and further