Exam 1: Ten Principles of Economics

The term used to describe a situation in which markets do not allocate resources efficiently is

Aiden and Zaria charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, six people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have six or five cars parked on their lawn does not affect their costs. From this information it follows that

One tradeoff society faces is between efficiency and equality. Define each term. If the U.S. government redistributes income from the rich to the poor, explain how this action affects equality as well as efficiency in the economy.

Central planning refers to

A hair stylist currently cuts and colors hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand?

Alana decides to spend 2 hours working overtime rather than going shopping with her friends. She earns $11 per hour for overtime work. Her opportunity cost of working is

Economics is the study of how society allocates its unlimited resources.

A rational decision maker takes an action if and only if the marginal benefit exceeds the marginal cost.

Economists use the term ______ to refer to fluctuations in economic activity, such as employment and production.

Trade with any nation can be mutually beneficial.

One of the effects of gas prices rising from about $2 to about $4 per gallon was airlines ordering new, fuel-efficient aircraft.

In the short run, which of the following rates of growth in the money supply is likely to lead to the lowest level of unemployment in the economy?

Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

In a centrally-planned economy, economic activity is guided by ______.

Communist countries worked on the premise that government officials were in the best position to allocate the economy's scarce resources.

For a number of years country A had inflation of 3 percent but for the last five years has had inflation of 6 percent. Country B had inflation of 4 percent for many years, but very recently inflation unexpectedly rose to 9 percent. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

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. What is the minimum price that would induce this company to produce the 601^st heart rate monitor?

Fundamentally, economics deals with

People are willing to pay more for a diamond than for a bottle of water because

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?