Exam 2: The Key Principles of Economics

Suppose a ticket to a concert costs $39, and parking costs $5. Further, in order to watch the concert, you must miss 2 hours of work where your hourly wage is $15 per hour. The total opportunity cost of watching a concert is:

The additional cost resulting from a one unit increase in the production of a good is known as the _______.

What is the opportunity cost of your college degree?

-Refer to Table 2.4. The marginal product of the 2nd tank of fertilizer is:

If a consumer can buy four DVDs for $44 and five DVDs for $50, then the marginal cost of the fifth DVD is:

Spending money on a fixed budget is an example of:

Tradeoffs involve an exchange of one thing for another because resources are limited and can be used in different ways.

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:

When you have a job and your employer compensates you for your time with money, resulting in both of you being better off, it is an example of a voluntary exchange.

Recall Application 3, "Jasper Johns and House Painting," to answer the following questions -Suppose that a house painter can earn $200 per day painting houses while Jasper Johns earns $5,000 per day painting art. According to the application, Jasper Johns should:

If your salary increases and the cost of goods in stores increase at the same rate, does a unit of money have more or less buying power?

The principle of diminishing returns occurs:

When people interact in markets for their own self interest, it is described as the:

-Refer to Table 2.3. The marginal product of the 1st worker is:

Farmer Bill grows corn on his 27- acre farm. To increase production, he puts more and more fertilizer on the corn. What does the marginal principle say will happen?

The additional cost resulting from a small increase in some activity is called the:

-Refer to Table 2.3. The marginal product of the 2nd worker 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 escalator instead of just standing still if:

Five years ago Tammy always took a big envelope full of coupons to the grocery store. Now she has a child in pre- school, she rarely brings coupons. Which of the following is not a possible explanation of this change in her behavior?

You rent a copy of a new action/adventure movie. The rental is for seven days and you watch the movie on the first day. You tell a friend about the film and your friend asks to come over and watch the movie with you before it is due back. What is your opportunity cost of watching the movie a second time?