Exam 1: Ten Principles of Economics

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.

Scarcity means that there is less of a good or resource available than people wish to have.

With careful planning, we can usually get something that we like without having to give up something else that we like.

When the government implements programs such as progressive income tax rates, which of the following is likely to occur?

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

When computing the opportunity cost of attending a professional football game as a spectator, you should include

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

In a market economy, who makes the decisions that guide most economic activity?

Give an example of a trade-off faced by society.

If China decides to trade with France, we know that

Give an example of government intervention that is intended to reduce an externality.

Which of the following is an example of an externality?

Market failure refers to a situation in which the market does not allocate resources efficiently.

Invisible hand is a term used by the economist ______ in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

An increase in the overall level of prices in an economy is referred to as

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

In most societies, resources are allocated by

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that

Which of the following is the most correct statement about the relationship between inflation and unemployment?

The phenomenon of scarcity stems from the fact that