Exam 2: The Key Principles of Economics

The principle that individuals and firms pick the activity level where the incremental benefit of that activity equals the incremental cost of that activity is known as the:

What does an increase in prices in retails stores do to the real value of the money you earn as wages?

The real- nominal principle states that:

Recall Application 6, "Repaying Student Loans," to answer the following questions: -The application shows that high inflation results in fewer years to pay back student loans because:

Basically, the marginal principle teaches us to evaluate the factors involved in taking an action to decide if the action it is worth the effort.

According to the marginal principle, a rational firm will introduce a movie sequel as long as:

-Refer to Table 2.3. The principle of diminishing returns sets in with the addition of the _ worker.

Recall Application 1, "Don't Forget the Costs of Time and Invested Funds," to answer the following questions. -According to the application, if the interest rate rises, then the opportunity costs of running a business:

Diminishing returns occurs because:

Suppose your bank pays you 5% interest per year on your savings account. If prices increase by 3% per year over that time, approximately how much real value do you gain by keeping $100 in the bank for a year?

-The firm depicted in Table 2.4 is likely to face diminishing returns because:

Recall Application 4, "Fertilizer and Crop Yields" to answer the following questions: -Table 2.1 in the application showed that when the bags of nitrogen applied went from 0 to 1 to 2 to 3 to 4, crop yield went from 85 to 120 to 135 to 144 to 147 bushels per acre. The principles of diminishing return began to take effect on the _ _ bag of fertilizer per acre.

Firms that make their customers better off get more repeat business and make earn more profits.

When a firm hired its tenth worker, its factory output increased by four units per month. Would you expect the firm's output to increase by eight more units per month if the firm hired two more workers?

Pat claims to save a great deal of money on groceries by traveling to various supermarkets to make her purchases at their advertised sale prices. She might visit as many as five different stores in one day in order to complete her weekly shopping. Her savings are not as great as she may think they are if she does not consider the:

Table 2.2 -Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Julianne staying open 2 hours per day. If she is following the marginal principle, what must her marginal benefit be?

According to the principle of diminishing returns, an additional worker decreases total output.

Figure 2.3 -In Figure 2.3, an efficient production point on production possibility curve XV is

Recall Application 2, "Why Not Walk Up an Escalator?," to answer the following questions -According to the application, an individual would walk up the stairs to listen to a music being played if:

Figure 2.4 -Joe runs a business and needs to decide how many hours to stay open. Figure 2.4 illustrates his marginal benefit of staying open for each additional hour. Suppose that Joe's marginal cost of staying open per hour is $40. How many hours should Joe stay open?