Exam 1: What Is Economics

It is possible to represent three dimensions on a two-dimensional graph by using

A theory is an untested assertion of alleged fact.

How would you interpret (1)an upward sloping curve and (2)a zero slope curve in a two variable diagram?

Suppose that interdiction efforts have stemmed the flow of illegal drugs into the United States. If there is no change in demand, this leads to higher prices for these substances. The result is an increase in crime as users attempt to maintain their now more expensive habits. Economists would call this effect

Explain the following statement: "Good decisions typically require marginal analysis, which weighs added costs against added benefits."

When a teacher in a private school points out to her high school principal that since there are empty seats in all classrooms, the cost of additional students is really zero, she is using the

Value judgments are based on people's tastes, preferences, and ethical opinions.

The United States has been willing to trade-off greater efficiency for greater wage equality.

The principle of comparative advantage explains how

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?

How do markets respond to price ceilings and price floors? Do attempts to repeal the laws of supply and demand meet their objectives?

Policy-oriented economists seek to develop theories to

A vertical line always has a slope of one.

Even though international trade is undertaken voluntarily, a country that engages in trade may not benefit from it.

Economic theory

"Correlation" is a measure of how one variable causes another to change.

Abstraction is unnecessary when economic analysis is done properly.

The growth rate of productivity is the most important determinant of material well-being in the short run.

If you leave your money in the bank at a fixed interest rate and allow for compounding of interest, show what will happen to your savings over time. Indicate with a graph whether there is a negative or positive slope between savings and time and what happens to the slope over time.

The term opportunity cost refers to the