Exam 1: Ten Principles of Economics

With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year.

When society gets the most it can from its scarce resources, then the outcome is called

Economics is the study of how evenly goods and services are distributed within society.

Suppose the state of Rhode Island passes a law that increases the tax on beer. As a result, beer consumers who live in Rhode Island start purchasing their beer in surrounding states. Which of the following principles does this best illustrate?

Which of the following is true?

Which of the following claims is consistent with the views of mainstream economists?

Explain the concept of market failure.

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

You have driven 850 miles on a vacation and then you notice that you are only 50 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include

Which of the following statements exemplifies a principle of individual decision making?

You are considering staying in college another semester so that you can complete a major in finance. In deciding whether or not to stay you should

Economists use the term ______ to refer to an increase in the overall level of prices in the economy.

Scenario 1-3 It costs a company $35,000 to produce 700 graphing calculators. The company's cost will be $35,070 if it produces an additional graphing calculator. The company is currently producing 700 graphing calculators. -Refer to Scenario 1-3. A customer is willing to pay $60 for the 701^th calculator. Should the company produce and sell it? Explain.

Inflation increases the value of money.

If the government were to intervene and set a wage for unskilled labor above the market wage, then we would expect, relative to the market outcome,

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

Scenario 1-1 You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $8.00 on a ticket and $4.50 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 10 points. -Refer to Scenario 1-1. What is your opportunity cost of going to the movies?

The marginal benefit Joseph gets from purchasing a fourth pair of shoes is

Scenario 1-4 You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $12.00 on a ticket and $4.75 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 15 points. -Refer to Scenario 1-4. What is your opportunity cost of going to the movies?

Scenario 1-6 It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors. -Refer to Scenario 1-6. A customer is willing to pay $60 for the 601^st heart rate monitor. Should the company produce and sell it? Explain.