Exam 1: Ten Principles of Economics

In which of the following decades was there both high inflation and rapid money supply growth in the US?

The government can potentially improve market outcomes if market inequalities or market failure exists.

For a number of years country A had inflation of 3% but for the last five years has had inflation of 6%. Country B had inflation of 4% for many years, but very recently inflation unexpectedly rose to 9%. Other things the same, in which of the countries would the higher inflation rate be more likely to reduce unemployment?

One way that governments can improve market outcomes is to ensure that individuals are able to own and exercise control over their scarce resources.

Invisible hand is a term used by the economist to describe how the decisions of households and firms lead to desirable market outcomes.

The ability of an individual to own and exercise control over scarce resources is called

Which of the following is an example of an externality?

Efficiency

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 company's marginal cost?

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

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

Inflation is defined as

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

Give an example of government intervention that is intended to improve equality.

Suppose one county in Missouri decides it wants to reduce alcohol consumption, so the county passes a law that raises the price of a bottle of beer by $1. As a result, people drive to other counties to drink alcohol, which results in an increase in drunk driving. This illustrates the principle that people respond to incentives.

What you give up to obtain an item is called your

Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of

If the government were to intervene and set a wage for unskilled labor above the market wage, then we would expect, relative to the market outcome,

The income of a typical worker in a country is most closely linked to which of the following?

In a market economy, economic activity is guided by