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Exam 1: Ten Principles of Economics

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Question 61

True/False

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Inflation is the primary determinant of a country's living standards.

A) True
B) False

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Question 62

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Market power and externalities are two possible causes of market failure.

A) True
B) False

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Question 63

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When Ukraine trades with Italy,

The collapse of communism in the Soviet Union and Eastern Europe took place mainly in the

A marginal change is a

Kyle is planning to take a roadtrip. After he makes his plans, he has to make some unexpected auto repairs. Also, he sees the price of gas has gone up. Which of these two events should Kyle consider in deciding if it is still worthwhile to go on the trip?

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.

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.

Suppose the cost of flying a 200-seat plane for an airline is $100,000 and there are 10 empty seats on a flight. The airline should sell a ticket to a standby passenger only if the passenger is willing to pay

Government policies designed to equalize the distribution of economic well-being include (i) the welfare system (ii) unemployment insurance (iii) progressive income tax

Explain how government policies that redistribute income from the rich to the poor might reduce efficiency.

The overriding reason why households and societies face many decisions is that

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.

If an electric power plant does not bear the entire cost of the pollution it emits, it will

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

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

Scenario 1-4 You have the afternoon free. You have a choice between going to the movies with a friend or studying economics for three hours. If you go to the movies, you will spend $12.00 on a ticket and $4.75 on popcorn. If you choose to study economics for three hours, you will raise your exam grade by 15 points. -Refer to Scenario 1-4. What is your opportunity cost of going to the movies?

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

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager should