Exam 2: The Key Principles of Economics

The real-nominal principle states that

The opportunity cost of something is what you sacrifice to get it.

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

Recall the Application about the best speed at which to sail an ocean cargo ship to answer the following question(s). -Based on the Application,the marginal cost of sailing a ship faster is

Mark quit his job as a salesman where he made $43,000 per year to start his own t-shirt making business.His business expenses are $6,000 per year on rent,$12,000 per year on supplies,and $4,000 per year on part-time help.As for his personal expenses,his apartment costs him $4,800 per year and his personal bills are an extra $1,200 per year.Which of the following is NOT part of the opportunity cost of running his business?

According to the marginal principle,a rational firm will introduce a movie sequel as long as

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 -According to the Application,the corn production exhibited the principle of diminishing returns 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 the Application,if you are a debtor who owes student loans,you are helped in paying back your student loans by

The weekly income earned in 1974 could buy ________ standard baskets of goods and services.

Table 2.2 -Julianne runs a business 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 Julianne's marginal benefit of staying open per hour is $28.If she is following the marginal principle,how many hours should Julianne stay open?

The extra benefit resulting from a small increase in an activity is called the

According to the principle of diminishing returns,an additional worker decreases total output.

Being self-sufficient in the production of everything we need is efficient.

What is the nominal value of money?

You borrow money to buy a house in 2012 at a fixed interest rate of 6.5%.By 2016,the inflation rate has risen to 8.5%.Considering only your mortgage,is inflation good news or bad news for you?

Figure 2.1 -On the production possibilities curve in Figure 2.1,the gain from decreasing manufacturing production from 500 tons to 300 tons is ________ tons of agricultural products.

Suppose your bank pays you 5% interest per year on your savings account.If prices increase by 3% per year over that time,approximately how much real value do you gain by keeping $100 in the bank for a year?

When applying the marginal principle,you should pick the level at which the activity's marginal benefit equals its marginal cost.

Suppose that you lend $1,000 to a friend who pays you back $1,100 the next year.Suppose that prices that year rose by 8% and the real rate of return in the stock market was 4%.Your friend says that he or she was being more than fair by giving you more than the rate of inflation as a return.What do you think?