Exam 1: Ten Principles of Economics: Part B

In the short-run,society faces a tradeoff between inflation and unemployment.

A tax on gasoline is an incentive that encourages people to drive smaller more fuel-efficient cars.

Using income tax revenue to fund the welfare system illustrates the conflict between efficiency and equality.

A market economy cannot produce a socially desirable outcome because individuals are motivated by their own selfish interests.

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

Government policies that improve equality usually increase efficiency at the same time.

The opportunity cost of working out for one hour is the value of the next-best activity that you could have done in that hour.

Inflation measures the increase in the quantity of goods and services produced from each hour of a worker's time.

Variations in the standard of living across countries is due almost entirely to differences in each nation's total output of goods and services.

Tuition is the single-largest cost of attending college for most students.

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