Exam 1: What Is Economics?

A large airline calculates that the additional cost of a having a passenger on a flight to the Bahamas as the cost of a bag of peanuts and a soft drink,which totals $1.50,but the airline's price is $600 for potential customers who want to buy vacant seats on the day of the flight.Which economic principle is this airline failing to utilize?

Graphs are useful because of the way they

Graphs are valuable because they facilitate interpretation of data.

Which of the following is an example of an undesirable side effect of the operation of the market mechanism?

The term opportunity cost refers to the

In economics the t cost of making a choice is the value of what must be given up.

Opportunity cost can best be defined as the

Which of the following statements is t?

To an economist,theory can be thought of as

It is impossible for both nations to gain when trading with one other.

In 1980,in order to stimulate agricultural production,Fidel Castro allowed Cuban farmers to sell their goods directly to consumers and keep whatever profit they made.Some farmers were earning $50,000 per year,compared with the average worker income of $2,400.The workers resented this.Castro denounced the farmers as "capitalist gangsters" and closed the free markets.Cuban cash income declined five percent and fresh vegetables were in short supply.This illustrates the economic concept of the

The optimal degree of abstraction depends on the objective of the analysis.

Which of the following is an example of an externality?

Over the past century,the main factor responsible for rising living standards in the United States has been productivity growth.

The principle of comparative advantage explains how

A student was heard to remark,"Even though I am certain to fail this course,I cannot withdraw from it since it is too late to get back my tuition." Use one or more "Ideas for Beyond the Final Exam" to analyze this reasoning.

If a decision maker uses marginal analysis,then the relevant costs are the

Economists are often perceived as disagreeing with each other.Is this the way things really are?

Productivity growth is the main cause of rising living standards.

How does correlation differ from causation? Give an example of each to illustrate your answer.