Exam 1: First Principles

You can spend $100 on either a new economics textbook or a new tablet computer. If you choose to buy the new economics textbook, the opportunity cost is:

The incentives built into the market economy ensure that resources are put to good use and that opportunities to make people better off are not wasted. This means that:

Specialization and trade usually lead to:

A new startup airline is offering a free round-trip ticket to Hawaii to the first 600 people who enter the airline's main office on the airline's first day of business. You arrive 24 hours before it is scheduled to open to be sure to get the free ticket, and you buy food from vendors while waiting in line. You successfully obtain the ticket. What was the cost to you for obtaining the ticket?

The principle that people will exploit opportunities to do what is best for others is the basis of all predictions by economists about individual behavior.

Which statement is FALSE?

An economy has achieved _____ if it _____ pass up any opportunities to make some people better off without making others worse off.

Which topic is studied in macroeconomics?

Because of the opportunity cost, if the United States spends $87 billion in the rebuilding of Iraq, it has to forgo the opportunity to spend $87 billion on some other program.

The concept of the margin decision deals with:

An economy is efficient if one person can be made better off by reallocating resources without making anyone else worse off.

When a chef prepares a dinner for a customer, which factor is physical capital?

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:

Using marginal analysis to decide whether to consume an additional slice of pizza requires making a comparison of the benefits and costs associated with the consumption of an additional slice of pizza.

If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is:

The trade-off between equity and efficiency occurs because:

Economists define an efficient use of resources as a situation in which:

According to standard economic theory, markets usually lead to efficiency.

A busy professor needs to decide whether to stay in his office to grade papers for another hour or to go home and go to bed. This is an example of:

Because people usually exploit opportunities to make themselves better off, if the price of gasoline rises and stays high for an extended period, we expect people to: