Exam 2: The Key Principles of Economics

The government uses the buying power of wages rather than face value or nominal value in reporting changes in "real wages" in the economy.

If real salaries decrease but nominal salaries do not,this means that

When a firm hired its tenth worker,its factory output increased by four units per month.Would you expect the firm's output to increase by eight more units per month if the firm hired two more workers?

Figure 2.3 -In Figure 2.3,the movement from production possibility curve YZ to production possibility curve XV could be caused by

You rent a copy of a new action/adventure movie.The rental is for seven days and you watch the movie on the first day.You tell a friend about the film and your friend asks to come over and watch the movie with you before it is due back.What is your opportunity cost of watching the movie a second time?

What is the real value of money?

According to the marginal principle,a rational individual should NOT undertake an economic activity if the

An increase in the benefit from undertaking an activity will result in an increase in the opportunity cost of that activity.

Recall the Application about running a lawn-cutting business using solar-powered equipment to answer the following question(s). -According to the Application,the opportunity cost of your invested capital is

Figure 2.4 -Joe runs a business and needs to decide how many hours to stay open.Figure 2.4 illustrates his marginal benefit of staying open for each additional hour.Suppose that Joe's marginal cost of staying open per hour is $32.How many hours should Joe stay open?

By making acquisitions,resources are used that could have been used to ________.

Is it possible for nominal wages to decrease while real wages increase?

When Bob has to give up lunch in order to have a fancy dinner,the economic principle that is highlighted by his situation is the

If each of us could produce everything we needed for ourselves,we would be considered to be ________.

The principle of opportunity cost

Figure 2.4 -Joe runs a business and needs to decide how many hours to stay open.Figure 2.4 illustrates his marginal benefit of staying open for each additional hour.Suppose that we observe Joe staying open 4 hours per day.If he is following the marginal principle,what must his marginal cost be?

Figure 2.1 -On the production possibilities curve in Figure 2.1,the opportunity costs of increasing agricultural production from 200 tons to 400 tons is ________ tons of manufactured products.

The principle that individuals and firms pick the activity level where the incremental benefit of that activity equals the incremental cost of that activity is known as the

The additional cost resulting from a small increase in some activity is called the

People acting in their own self-interest try to gain at the expense of others in exchange leads to someone necessarily losing in a voluntary exchange.