Exam 1: Ten Principles of Economics

Penny is piano teacher and Dan is a tile layer. If Penny teaches Dan's daughter to play the piano in exchange for Dan tiling her kitchen floor,

Which of these activities will most likely impose an external cost?

If wages for accountants rose, then accountants' leisure time would have a lower opportunity cost.

Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to increase the money supply. This is likely because

People are likely to respond to a policy change

The business cycle is measured by the

Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do?

Which of the following is an example of an externality?

When the government prevents prices from adjusting naturally to supply and demand,

The price of diamonds is high, in part because the majority of the world's diamonds are controlled by a single firm. This is an example of

The business cycle is the

If the price of a dozen eggs were fixed above the current price, then we would expect

Suppose your college institutes a new policy requiring you to pay for a permit to park your car in a campus parking lot.

The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that

Which of the following statements about markets is most accurate?

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

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

Guns and butter are used to represent the classic societal tradeoff between spending on

The opportunity cost of an item is

When the government attempts to improve equality in an economy the result is often