Exam 1: Ten Principles of Economics: How People Make Decisions

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

You are considering staying in college another semester so that you can complete a major in economics.In deciding whether or not to stay you should

After much consideration,you have chosen Cancun over Ft.Lauderdale as your Spring Break destination this year.However,Spring Break is still months away,and you may reverse this decision.Which of the following events would prompt you to reverse this decision?

John is an athlete.He has $120 to spend and wants to buy either a heart rate monitor or new running shoes.Both the heart rate monitor and running shoes cost $120,so he can only buy one.This illustrates the principle that

Max and Maddy charge people to park on their lawn while attending a nearby craft fair.At the current price of $10,seven people park on their lawn.If they raise the price to $15,they know that only five people will want to park on their lawn.Whether they have seven or five cars parked on their lawn does not affect their costs.From this information it follows that

Government policies resulting in reduced efficiency include (i)The welfare system (ii)Unemployment insurance (iii)Progressive income tax

A rational decisionmaker takes an action if and only if

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

A certain state legislature is considering an increase in the state gasoline tax.Representative Campbell argues that an increase in the gasoline tax would harm low-income drivers disproportionately.Representative Richards responds by saying that low-income drivers own smaller cars that use less gasoline,and that low-income drivers therefore would not be harmed disproportionately.

A rational decision maker takes an action only if the

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort.This law is likely to

Ralph Nader's book Unsafe at Any Speed caused Congress to require

While pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it,the regulations come at the cost of reducing the incomes of the regulated firms' owners,workers,and customers.This statement illustrates the principle that

Betty's Bakery bakes fresh bread every morning.Any bread not sold by the end of the day is thrown away.A loaf of bread costs Betty $2.00 to produce,and she prices loaves of bread at $3.50 per loaf.Suppose near the end of one day Betty still has 12 loaves of bread on hand.Which of the following is correct?

Consider Noah's decision to go to college.If he goes to college,he will spend $80,000 on tuition,$15,000 on room and board,and $4,000 on books.If he does not go to college,he will earn $22,000 working in a store and he will spend $13,000 on room and board.Noah's cost of going to college is

College-age athletes who drop out of college to play professional sports

Rational people make decisions at the margin by

Bridget drinks three sodas during a particular day.The marginal benefit she enjoys from drinking the third soda

The balance between efficiency and equality is an illustration of

The opportunity cost of going to college is