Exam 1: Ten Principles of Economics

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages?

What is the main difference between a centrally planned economy and a market economy?

In the long run the primary effect of increasing the quantity of money is higher prices.

The economy of the former Soviet Union is best described as a

If an externality is present in a market, economic efficiency may be enhanced by

A friend of yours asks you why market prices are better than government-determined prices. Because you understand economic principles, you say that market-determined prices are better because they generally reflect

Scenario 1-6 It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors. -Refer to Scenario 1-6. A customer is willing to pay $60 for the 601st heart rate monitor. Should the company produce and sell it? Explain.

Central planning refers to

Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?

For most students, the earnings they give up to attend college are

Scenario 1-6 It costs a company $30,000 to produce 600 heart rate monitors. The company's cost will be $30,070 if it produces an additional heart rate monitor. The company is currently producing 600 heart rate monitors. -Refer to Scenario 1-6. What is the minimum price that would induce this company to produce the 601st heart rate monitor?

Suppose that in Germany total annual output is worth $600 million and people work 40 million hours. In France total annual output is worth $700 million and people work 50 million hours. In which country do people enjoy a higher standard of living?

Trade makes costs

Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. The marginal cost per room per night

The adage, "There is no such thing as a free lunch," means

The "broken window fallacy"

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

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies

Which of these activities will most likely result in an external benefit?

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