Exam 1: Ten Principles of Economics

In the early 1980s, U.S. economic policy was directed toward reducing inflation. What would you have expected to observe during this short period of time?

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

If the government were to intervene in a market economy and fix the price of visiting a health care provider below the market price, then we would expect, relative to the market outcome,

People are likely to respond to a policy change

Ramona decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is

During the 1990s, the United Kingdom experienced low levels of inflation while Turkey experienced high levels of inflation. A likely explanation of these facts is that

To raise productivity, policymakers could

The failure of communism in a large number of countries is at least partly explained by

According to Adam Smith, the success of decentralized market economies is primarily due to

Invisible hand is a term used by the economist in his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations.

Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor,

Which of the following statements best represents the principle represented by the adage, "There is no such thing as a free lunch"?

The cost of an action is measured in terms of foregone opportunities.

It costs a furniture company $8,750 to produce 25 tables. The company's total cost will be $9,125 if it produces a 26th table. If the company produces 26 tables, then

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate?

Trade between countries tends to

What are the two possible causes of market failure?

The broken window fallacy states that when a window breaks and someone spends money to repair it, they have created new economic activity that would not have otherwise taken place.

In a particular country in 1999, the average worker had to work 20 hours to produce 55 units of output. In that same country in 2009, the average worker needed to work 28 hours to produce 77 units of output. In that country, the productivity of the average worker

A tradeoff exists between a clean environment and a higher level of income in that