Exam 1: Ten Principles of Economics

Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is

The opportunity cost of working out for one hour is the value of the next-best activity that you could have done in that hour.​

Which of the following is not an example of the opportunity cost of going to school?

If the average cost of transporting a passenger on the train from Chicago to St. Louis is $75, it would be irrational for the railroad to allow any passenger to ride for less than $75.

The fact that people are willing to pay much more for a diamond, which is not needed for survival, than they are willing to pay for a cup of water, which is needed for survival, is an example of irrational behavior.

England can benefit from trade

Economists use the term ______ to refer to a situation in which the market on its own fails to produce an efficient allocation of resources.

Which of the following is true?

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

The term ______ refers to a small incremental adjustment to an existing plan of action.

The term "productivity"

The overriding reason why households and societies face many decisions is that

In the long run the primary effect of increasing the quantity of money is higher prices.

If an externality is present in a market, economic efficiency may be enhanced by

Which of the following phrases best captures the notion of efficiency?

The famous observation that households and firms interacting in markets act as if they are guided by an "invisible hand" that leads them to desirable market outcomes comes from whose 1776 book?

Jane decides to spend four hours working overtime rather than going to a family gathering. She earns $12.50 per hour for overtime work. Her opportunity cost of working is

Which of the following is not an example of scarcity?

Which of these activities will most likely impose an external cost?

Which of these activities will most likely result in an external benefit?