Exam 2: The Key Principles of Economics

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 we observe Joe staying open 4 hours per day. If he is following the marginal principle, what must his marginal cost be?

Figure 2.2 -Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide people with medical care in a given year. The opportunity cost of the fourth new highway built in a year is:

Firms expect to make money on repeat business because:

The only way individuals can cope with scarcity is by being self- sufficient.

Mark quit his job as a salesman where he made $43,000 per year to start his own t- shirt making business. His business expenses are $6,000 per year on rent, $12,000 per year on supplies, and $4,000 per year on part- time help. As for his personal expenses, his apartment costs him $4,800 per year and his personal bills are an extra $1,200 per year. Which of the following is not part of the opportunity cost of running his business?

Recall Application 5, "The Declining Real Minimum Wage," to answer the following questions: -According to the application, the weekly income earned in 1974 at that time could buy _______ standard baskets of goods and services in 2007.

You are running a small yard maintenance business for the summer. What do you expect to happen to the number of yards you can maintain in a day as you add workers if you don't purchase more capital equipment (like mowers and leaf blowers)?

Figure 2.1 -On the production possibilities curve in Figure 2.1 the gain from decreasing manufacturing production from 700 tons to 500 tons is:

When two parties engage in voluntary exchange, one must be made worse off.

Table 2.1 -A group of people has formed a house cleaning and yard maintenance business. The number of houses or yards that they can clean or maintain in any given day is depicted in Table 2.1. As the group cleans more houses, the opportunity cost of cleaning houses:

Recall Application 5, "The Declining Real Minimum Wage," to answer the following questions: -According to the application, the weekly income earned in 2007 at that time could buy standard baskets of goods and services.

The value of money or income in terms of the quantity of goods the money can buy is called its:

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

A firm produces its product using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50%. Which of the following is the most likely explanation of this finding?

The principle that "as one input increases while the other inputs are held fixed, output beyond some point will exhibit increases at a decreasing rate" is known as the:

You have an hour between your economics and math classes. What is the opportunity cost of that time if you use it to do math homework?

The economic reason why some individuals choose keep their tuition money and not to go to school is:

Recall Application 4, "Fertilizer and Crop Yields" to answer the following questions: -As 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 results show that as more bags of nitrogen was added, holding all other inputs constant, output:

Figure 2.3 -In Figure 2.3, point B:

Figure 2.2 -Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide people with medical care in a given year. The figure shows that the production possibilities curve is: