Exam 1: What Is Economics

In terms of the competing claims of equality and efficiency, in the United States we have

Economic theory is a necessity, not a luxury. This statement is true because theory

Is it possible to express an economic model in words without diagrams?

A student eats a candy bar just prior to taking a test and receives a high grade. He does not buy one for the next test and receives a low score. On his third test, he again eats a candy bar and gets a high score. This student concludes that eating candy bars leads to higher test scores. His hypothesis

A diagram is a good example of a(n)

Economic theory simplifies relationships to explain how the relationships interact.

The term opportunity cost refers to the

The slope of a curved line at a particular point is

In 1981, the US government passed a law that significantly lowered tax rates on high-income individuals. The premise was that high tax rates deter high-income individuals from working and investing, reducing the growth of the economy. This is an example of

The rationale for rent control is that it protects moderate- to low-income families from the burden of rapidly rising rents and from eviction if they are unable to pay. It also prevents landlords from reaping windfalls as property values rise. Opponents note that rent controls usually lead to a reduced supply of rental housing and shortages. The proponents of rent controls support them primarily on the grounds of

"Assume that all individuals have perfect information about prices now and in the future, that they have identical tastes, that all markets are competitive, and that there is no government." This statement is an example of how economists

In the early 1800s, there was a smallpox outbreak in a remote part of Russia. The government sent in a large group of army doctors, but they were too late to stop the epidemic. Thirty years later, there was another smallpox scare. A local statistician cautioned the government against a similar response, noting the increased mortality and high number of army doctors during the earlier epidemic. Was the statistician providing good advice?

The market price of a transaction always includes all of the costs and benefits associated with the transaction.

Lower inflation rates are usually correlated with lower unemployment rates.

A useful economic model

In her calculation of the cost of going to college, an economist would include the amount of forgone earnings over the years spent at college.

Many believe that fairness calls for higher income taxes on the wealthy. Using one of the "Ideas for Beyond the Final Exam," explain how higher taxes on the wealthy will affect output.

The opportunity cost of any good or service is the

Opportunity cost is the

Both parties gain in a voluntary exchange.