Exam 2: The Key Principles of Economics

Table 2.2 -Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Krystal staying open 2 hours per day. If she is following the marginal principle, what must her marginal benefit be?

Basically, the marginal principle helps us to evaluate the factors involved in taking an action or if doing something is worth the effort.

The cost of a bachelor's degree in philosophy equals the tuition plus the cost of room and board.

A "market" is an arrangement that allows people to exchange things.

The principle that the cost of something is equal to what is sacrificed to get it is known as the

A principle is a self-evident truth that most people readily understand and accept.

Angelina, age seven, decides to dress up like Princess Fiona for Halloween. What is the opportunity cost of her decision?

Recall the Application about Jasper Johns and house painting to answer the following question(s). In this Application, it is assumed that Johns can earn $5,000 per day by painting works of art, and therefore should hire a house painter who charges $150 per day, and takes 10 days, to paint his house. -This Application addresses the economic concept of

In order to get his bachelor's degree, Timothy gave up an offer for a full time job as a bartender. Therefore, Timothy incurred an opportunity cost.

Recall the Application about the use of fertilizer and its impact on crop yields to answer the following question(s). The table is taken from this Application. Fertilizer and Corn Yield -Diminishing returns occurs because

Recall the Application about the impact inflation has on your potential future salary and the repayment of student loans to answer the following question(s). -According to this Application, more years of work would be required to pay off a student loan if all prices

If you remove resources from factory production, the quantity of factory goods will

Table 2.2 -Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Krystal staying open 4 hours per day. If she is following the marginal principle, what must her marginal benefit be?

The sacrifices made by societies in order to engage in military spending represent

If an economy is represented by a point inside its production possibilities curve,

You borrow money to buy a house in 2009 at a fixed interest rate of 5.5 percent. By 2012, the inflation rate has steadily fallen to 1.5 percent from the recent high of 3.0 percent in 2009. Considering only your mortgage, is inflation good news or bad news for you?

The principle of voluntary exchange is the concept that a voluntary exchange between two people makes both people better off.

Table 2.1 -Kaitlyn and Larissa have formed a dog bathing and grooming business business. The number of dogs they can bathe or groom in any given day is depicted in Table 2.1. The opportunity cost of grooming the sixth dog in a day is bathing ________ dog(s).

Figure 2.1 -The production possibilities curve in Figure 2.1 illustrates the notion of

The principle that states that what matters to people is the real value or purchasing power of money is the