Exam 1: Ten Principles of Economics

DeShawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. DeShawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He can sell the boat as it is now for $400. What should he do?

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

Which of the following is not an example of scarcity?

When the "invisible hand" guides economic activity, prices of products reflect

Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low average wage level and a low level of output per person. Which country can benefit from trade?

Economics is the study of

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

Communist countries worked under the premise that

With careful planning, we can usually get something that we like without having to give up something else that we like.

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

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

In a market economy, economic activity is guided by

Productivity is defined as the quantity of goods and services produced from each unit of labor input.

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

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

Economists use the term to refer to an increase in the overall level of prices in the economy.

The classic tradeoff between "guns and butter" states that when a society spends more on national defense, it has less to spend on consumer goods to raise the standard of living.

The historical rise in living standards of American workers is primarily a result of

For a very long time the country of Zeeland has had an inflation rate of 9%. Suddenly its inflation rate drops to 3%. The drop in the inflation rate

The phenomenon of scarcity stems from the fact that